Montpelier Shows Stability on Fundamentals - Analyst Blog

On May 23, 2014, we issued updated research report on Montpelier Re Holdings Ltd. MRH.

With net income of $1.48 per share in the first quarter of 2014, Montpelier outperformed the Zacks Consensus Estimate by 48% and improved 25% year over year riding on the strength of solid underwriting results. Lower share count attributable to continued buyback also boosted the bottom line. First-quarter results helped the company to keep its positive surprise streak alive.

Montpelier has expanded its underwriting reach beyond Bermuda. It has transformed from a Bermuda “monoline” property catastrophe reinsurer to a global diversified catastrophe specialist, and has expanded its operations in the U.S. and U.K. It has increased its focus on short-tail reinsurance underwriting.

The company prudently manages risks by diversifying across geographical regions. It also scores strongly with the credit rating agencies.

Montpelier engages in regular buybacks and hikes dividend in its concerted effort to enhance shareholders' value. The company's dividend has grown at a 5-year CAGR of 11% and currently yields 1.6%.  With respect to repurchase activities, the company bought back $70.3 million worth shares in the first quarter and has already repurchased $17 million in the second quarter.

With respect to estimate revisions, this Zacks Rank #2 (Buy) stock has witnessed a positive movement over the last 30 days. For 2014, the Zacks Consensus Estimate increased 15% to $3.60 per share as all the estimates moved north. For 2015, the same inched up by 1% to $3.15 as half of the estimates moved up.

Nonetheless, being a property and casualty insurer, Montpelier is always exposed to cat losses that weigh on its underwriting results. In addition, the company's debt level has also been piling up over the years with debt to equity ratio deteriorating.

Other Stocks to Consider

Some other stocks worth mentioning in the property and casualty insurance industry are Allied World Assurance Company Holdings, AG AWH, AmTrust Financial Services, Inc. AFSI and Aspen Insurance Holdings Ltd. AHL. All these stocks sport a Zacks Rank #1 (Strong Buy).
 

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