Bermuda-based Montpelier Re Holdings Ltd. reported a net loss of $875.1 million, or $12.16 loss per share, for the three months to Sept. 30, 2005 and a net loss of $691.9 million, or $10.49 loss per share, for the first nine months of 2005.
Including unrealized gains and losses on our investment portfolio, the comprehensive loss for the quarter was $896.9 million, or $12.47 comprehensive loss per share, and $750.3 million, or $11.38 comprehensive loss per share, for the nine months to Sept. 30, 2005. Book value per share at Sept. 30, 2005, on a fully converted basis (1), was $12.69. The change in fully converted book value per share adjusted for dividends (2) for the year to date has been a negative 33.3%, and a negative 27.1% for the trailing twelve months.
The company estimates the net impact of natural catastrophes on third quarter financial results to be $972 million, including $809 million for Hurricane Katrina, $141 million for Hurricane Rita, and $22 million for Hurricanes Dennis and Emily and the European floods.
Previously, on Sept. 12, based on an estimated industry loss for Hurricane Katrina of $30-40 billion, the company announced the estimated net impact on its financial results to be in the range of $450-675 million. The company now estimates industry losses attributable to Katrina of approximately $50 billion, exclusive of losses in the National Flood Insurance Plan.
Anthony Taylor, president and CEO, commented, “The third quarter of 2005 was the most costly quarter ever for catastrophe losses to the insurance and reinsurance industry. For Montpelier, with a short tail property concentration and a declared policy of purchasing limited amounts of reinsurance protection, the losses incurred have inevitably been significant. We are nonetheless very disappointed by this outcome. We are taking appropriate steps to reduce the potential impact of very large events by managing both our gross and net exposures so as to respond to the post-Katrina environment.
“We estimate total industry losses in the quarter from the major natural catastrophes to be in excess of $60 billion. We believe that the fallout from Hurricane Katrina, coupled with the other events in the quarter and the latter half of 2004, will result in changes in the way certain classes of business will be structured and priced. We expect both the demand for our products and their pricing to increase significantly. This should lead to new opportunities as we move into the 2006 renewal season.”
Kip Oberting, CFO, added, “Our total capital stood at $1.4 billion at September 30, 2005. This is $330 million less than we had at the end of June, but nearly $400 million more than we had when we were launched in the wake of the September 11 events. Underwriting opportunities look attractive for 2006 and we will position our capital structure to ensure the strength of our ratings and take advantage of what we believe will be a compelling market in our core lines of business. For example, we are accelerating our efforts, begun this summer, to partner with capital providers in non-traditional vehicles. We believe that this approach will allow us to leverage our underwriting expertise in a capital efficient manner. Our ultimate objective remains to optimize growth in intrinsic value per share.”
Hurricane Wilma made landfall in Florida on Oct. 24. The company estimates Wilma net losses in the range of $75-85 million for industry losses in the range of $10-12.5 billion, including losses from Mexico, the Caribbean, and Florida. This estimate is based mainly on output from industry and proprietary models and a review of in-force contracts.
(1) Fully converted book value per share as at Sept. 30, 2005 is a non-GAAP measure based on total shareholders’ equity at Sept. 30, 2005 divided by common shares outstanding of 89,178,490 at Sept. 30, 2005. Fully converted book value per share at Dec. 31, 2004 is a non-GAAP measure based on total shareholders’ equity at Dec. 31, 2004 plus the assumed proceeds from the exercise of outstanding options and warrants of $157.5 million at Dec. 31, 2004, and divided by the sum of shares, outstanding options and warrants of 71,372,892 at Dec. 31, 2004. The company believes that fully converted book value per share more accurately reflects the value attributable to a common share.
(2) Change in fully converted book value per share adjusted for dividends is a non-GAAP measure. It is the internal rate of return of the change in fully converted book value per share from $26.75 at Dec. 31, 2004 to $12.69 at Sept. 30, 2005, including the three accrued ordinary quarterly dividends of $0.36 each and the special dividend of $5.50 per common share and warrant declared and paid in the first nine months of 2005. For these purposes fully converted book value per share assumes that the warrants are not exercised if the book value per share is less than the strike price. The company believes that this measure most accurately reflects the return made by its shareholders as it takes into account the effect of all dilutive securities and the effect of dividends.
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