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MONTPELIER RE HLDGS (MRH)

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NYSE \ Financial \ Property & Casualty Insurance

Montpelier Re Holdings (MRH) is a Bermudian reinsurance company for the global insurance market, conducting reinsurance operations through its subsidiary, Montpelier Re.

1 Company Analysis
2 News Feed
3 Risks
4 Research Links
5 Options
6 Notes

Today

Max

Funds w/ MRH:	22
Rank:	330 / 351

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Company Analysis

Montpelier was founded by White Mountains Insurance Group, Ltd. and Benfield Group plc. The company began operations in 2001 and in October 10, 2006, they went public on the NYSE. Insurance companies, when well run, are extremely profitable. Two heroes of American capitalism, Shelby Davis and Warren Buffet, both got their start in the insurance game. Reinsurance companies provide insurance to insurance companies.

Montpelier Re provides, amongst other types of re-insurance, property catastrophe. "Catastrophe" brings to mind Katrina, and for Montpelier Re, "Katrina" brings to mind pain. Lot's of it: the company lost 50% of its value after Katrina and has not yet recovered. Because Montpelier (especially the way it used to be run) geared a significant portion of their business toward insuring for super-catastrophes, during non-eventful years, their business tended to be more profitable than other companies in the industry, but during very high incident years, Montepelier tended to do worse. However, Montepelier is not an aggressive insurance company in the sense that it does not seek growth in premiums merely for the sake of growth. Rather, they only write policies when they perceive that the price is right. Since Katrina, Montpelier has taken steps to reduce their risk profile. Additionally, Montpelier is very conservative in how it invests its float. At present, it invests only about 4% of its float in equities; the rest is in more conservative investments. ^[1]

Montpelier has consistently made money since its inception, except for last year.

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News Feed

10/06/08 3:10 pm	4 Stocks Bucking the Downtrend (at Motley Fool)
10/03/08 9:10 am	Montpelier Re: $130 million impact from hurricanes (AP)
10/02/08 3:10 pm	MONTPELIER RE HOLDINGS LTD Files SEC form 8-K, Regulation FD Disclosure, Financial Statements and Exhibits (EDGAR Online)
10/02/08 3:10 pm	Montpelier Re Holdings Ltd. Reports Initial Loss Estimates from Hurricanes Gustav and Ike (Business Wire)
09/30/08 10:09 am	These Stocks Beat Chinese Stocks (at Motley Fool)
09/25/08 10:09 am	Top Nasdaq Short-Squeeze Plays (at TheStreet.com)
09/18/08 4:09 pm	Montpelier Re Holdings Ltd. to Release Third Quarter 2008 Results on October 23, 2008 (Business Wire)
09/18/08 4:09 pm	MONTPELIER RE HOLDINGS LTD Files SEC form 8-K, Regulation FD Disclosure (EDGAR Online)
09/17/08 2:09 pm	AIG's Failure Is So Much Bigger Than Enron (at Motley Fool)
09/15/08 3:09 pm	Montpelier Re CEO and President to Participate in Fox-Pitt, Kelton's Bermuda in Boston Insurance Conference (Business Wire)

More News...

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Risks

Insurance companies (including reinsurance companies) base their rates on the estimated likelihood of a specific event happening. These estimates are based on models. Katrina was modeled as a once in fifty year event, and a once in 500 year event in the gulf. The biggest risk facing insurance companies like Montpelier is that global warming is causing weather patterns to change in highly unpredictable ways, meaning that their models may be inaccurate. Since no one understands exactly how weather patterns will continue to change, models may be prove wildly inaccurate. Insurance companies are not stupid, though: they pay attention to the news and they know that their business is facing uncertainty in this regard. Accordingly, insurance rates have gone up to reflect the possibility that catastrophes are now more likely. But since no one knows what is in store for our planet, no one can know whether the pricing models that the insurance companies are now building accurately reflect the risk they are assuming with each insurance policy.

The flip side of this is that since Montpelier has shifted its risk profile away from insuring for Katrina-type events, they are foregoing the potential profits that they might have earned. So if Katrina does, indeed, turn out to be a fluke event, then they will have suffered Katrina's losses but not waited to enjoy the potential benefits of a higher priced market. Sort of like closing the barn doors after the cows have left...

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