Bermuda-based Montpelier Re Holdings Ltd. reported net income of $103.8 million, or $1.56 diluted earnings per share, for the three months to March 31, 2003.
Comprehensive income was $103.0 million for the quarter, or $1.55 diluted comprehensive income per share. Comprehensive income includes $0.8 million of unrealized losses on investments for the quarter. Book value per share at March 31, 2003, on a fully converted basis, was $20.81, an increase of $1.42 or 7.3 percent in the first quarter of 2003. Fully converted book value per share at March 31, 2002 was $16.53. Fully converted book value per share has increased $4.28 or 25.9 percent in the 12 months to March 31, 2003.
Anthony Taylor, president and CEO noted, “The first quarter has gone extremely well for Montpelier Re. In the areas of premium generation, program leadership, portfolio design and diversification and in the continuing enhancement of our modeling capabilities, we are very pleased at the success we believe we have achieved in 2003 so far.”
Tom Kemp, CFO, added, “We were pleased that in the first quarter of 2003, Montpelier met or exceeded its revenue projections, had encouraging results in the development of prior period reserves and in the low number of loss events in our portfolio, and did not suffer any investment impairments. Earned premiums are picking up nicely as unearned premium reserves from 2002 begin to unwind in 2003. If we continue to generate premium at our anticipated rate, earned premiums will accelerate throughout 2003. In due course, with normalized loss experience for the remainder of the year, this should produce a substantial increase in book value for our owners. As it stands at the end of the first quarter however, we are pleased with the growth in book value.
“In the year so far we have seen revenue levels at least where we anticipated they might be; however, for now, our guidance for gross written premium of between $900 and $925 million and net earned premium of between $775 and $800 million for the whole of 2003 will remain unchanged.”
Gross premiums written were $366.6 million for the quarter, an 80 percent increase over the same period in 2002. Due to the favorable loss experience, reinstatement premiums have been modestly less than expected. Reinsurance premiums ceded were $34.3 million, and include both reinsurance protection purchased by Lloyd’s syndicates inuring to the company’s benefit and retrocessional cover purchased for the protection of its direct and facultative account.
Net premiums earned were $184.7 million in the three months to March 31, 2003, a five-fold increase over the first quarter of 2002. Approximately two thirds of the earned premium relates to the 2002 underwriting year, and the remainder to business written in 2003. Net earned premium will continue to lag net written premium until the level of premium written stabilizes at a constant level year on year.
Net investment income, including both realized and unrealized gains and losses and foreign exchange gains, was $16.9 million for the quarter. Reinvestment returns continue to be at historical lows; however, its short duration, high quality portfolio is poised to perform well should rates begin to rise.
Loss and loss adjustment expenses were $47.7 million for the quarter, representing a loss ratio of 25.8 percent. The lower than anticipated loss ratio has increased profit commission accruals; however, this has been more than offset by a reduced general and administrative cost ratio. The ratio of acquisition costs and general and administrative expenses to net earned premiums was 27.0 percent compared to 29.3 percent in the same period in 2002.
At March 31, 2003, net loss reserves were $167.3 million, of which $130.1 million related to an estimate for losses incurred but not reported. In the three months to March 31, 2003, case reserves in place at Dec. 31, 2002 reduced on a net basis by $3.7 million, while a further $14.6 million of IBNR reserves from prior periods was also released. In total, positive prior period development benefited our loss ratio in the quarter by approximately 10 percent. A total of $10.0 million of claims was paid in the first quarter of 2003.
Combined ratios were 52.8 percent for the first quarter of 2003 compared to 68.5 percent for the first quarter of 2002.
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