Montpelier Re: Q4 Net Loss of $61M

February 16, 2006

Bermuda-based Montpelier Re Holdings Ltd. reported a net loss for the quarter ended Dec. 31, 2005 of $61.0 million, or $0.68 per share, compared with net income of $102.4 million, or $1.53 per share, for the same quarter last year.

The loss excluding net realized losses for the fourth quarter was $53.2 million, or $0.59 per share, compared with income of $94.6 million, or $1.41 per share, for the same quarter of 2004. The company ended 2005 with a fully converted book value per share of $11.86, down 37.8% for the year, and 6.0% for the quarter, adjusted for dividends.

The result for the fourth quarter 2005 includes $68.8 million of net losses from Hurricane Wilma compared to a $75 – $85 million estimate provided in the company’s third quarter earnings release, resulting in a net impact of $79.2 million after reinstatement premiums. The result includes an additional $64.8 million net charge for third quarter 2005 hurricanes.

The net loss for the year was $752.9 million, or $10.49 per share, compared with net income of $240.3 million, or $3.55 per share, in 2004. For 2005, the net loss excluding net realized gains was $783.5 million, or $10.92 per share, compared with net income of $226.1 million, or $3.34 per share, in 2004. Record industry catastrophe losses resulted in a net charge of $1,116.2 million, or $15.56 per share, compared with $239.6 million, or $3.54 per share, in 2004. The combined ratio for the year was 200.7%.

Anthony Taylor, president and CEO, commented, “2005 was the most costly year 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.

“Following the third quarter hurricanes, we adjusted our risk profile to meet more stringent capital requirements in the industry and acted to take best advantage of the new environment. These steps included optimizing our assumed portfolio, purchasing additional reinsurance, issuing our first catastrophe bonds, partnering with capital providers in Blue Ocean Reinsurance Ltd., an unrated vehicle specializing in retrocessional cover, raising an additional $600 million in equity capital in September 2005, reducing dividends and, earlier this year, raising an additional $100 million through the issuance of trust preferred securities.

“The changes will result in reduced exposure to extremely large industry events per dollar of capital at risk. Our target return on equity over the cycle remains unchanged, but we believe the potential outcomes around that target are less volatile. We will continue to explore alternative structures to leverage our underwriting capabilities and enhance growth in book value per common share.

“In the meantime, we are seeing important changes in the way certain classes of business are structured and priced as the market adjusts to increased modeling loads and rising industry capital requirements. Although January 1st renewal pricing in international property classes did not meet our expectations, the equivalent U.S. pricing broadly did and overall demand for many of our key products has increased significantly. We expect the market in these products to tighten and pricing to continue to increase as the year rolls out. We believe we are now well positioned to take advantage of the substantial opportunities we see in the market place.”

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