Bermuda’s Montpelier Re has posted a 124% rise in underwriting income for 2013, despite a fall in headline GPW.
Bermuda-based property-catastrophe specialist Montpelier Re has benefited from the relatively benign 2013 catastrophe year, recording an underwriting income of $263.4m, up from $117.3m in 2012. This was despite a decline in gross premiums written, to $706.0m from $735.3m. Net premiums earned fell to $599.6m, from $616.5m in 2012.
Net income for the year declined, mainly caused by a recorded loss of $49.2m on net realized and unrealized investments. That compared with a gain of $82.4m in 2012. There was also a sharp deterioration in net income from derivative instruments to a loss of $25.3m, from a gain of $3.2m in 2012. Net income in total was $210.6m, down from $227.6m in 2012. That led to a decline in earnings per share to $3.61, from $3.67.
Examining the results in slightly greater detail, we see relatively similar declines at Montpelier Bermuda (Net Premiums Earned down to $359.2m from $369.5m) and Montpelier at Lloyd’s (NPE down to $213.7m from $217.3m). Within those geographies, prop-cat treaty reinsurance at Lloyd’s showed the most marked percentage decline, with NPE falling to $4.1m from $11.6m. Without that decline and a small decline in Property Specialty Treaty Reinsurance, the NPE for Montpelier at Lloyd’s would have gone up. Other Specialty Treaty Reinsurance NPE at Lloyd’s rose to $83.0m from $79.2m, while Property & Specialty Individual Risk was up to $121.5m from $119.5m.
Over at Montpelier Bermuda, where Prop-Cat Treaty Reinsurance is a majority of the reinsurer’s business, only Property Specialty Treaty Reinsurance bucked the slightly declining trend – NPE rose to $47.3m from $44.5m in 2012. Prop Cat Treaty Reinsurance NPE fell to $229.5m from $235.4m.
Montpelier Re’s move into the collateralized reinsurance sector was reflected in an increase in NPE – solely in Prop-Cat Treaty Reinsurance – to $26.2m from $2.4m
Referring to the January renewals, president and CEO Christopher Harris said: “Despite competitive market conditions during the January renewals, we continued to succeed in achieving preferred signings and in expanding our product mix. With our strong balance sheet and specialist underwriting approach, we believe we are positioned to perform well across market cycles.”
A look at Montpelier Re’s natcat risk management indicates that Mid-Atlantic hurricane remains the greatest risk to shareholder equity, with treaty limits of $581m as of January 1 2014 representing a potential 35% hit to shareholder equity. This is a slight reduction in the exposure as of June 1 2013, when the $610 treaty limit represented 38% of shareholder equity. Other US hurricane risks range from $462m limits (Florida hurricane) down to $184m (Hawaii hurricane).
US quake exposure ranges from $546m in on the New Madrid faultline, down to $392m and $372m for California quake and Northwest quake respectively.
Montpelier’s European windstorm is split into three treaty limits – Western Europe ($488m), UK & Ireland ($419m) and Scandinavia ($183m)
Elsewhere in the world there is a reasonable diversity to Montpelier Re’s exposure, with eight categories having a top limit of $276m (Japan quake) and a bottom of $150m (Japan windstorm). Japan, Canada, Australia, New Zealand, Turkey and Chile are the quake exposures, while Australia and Japan provide the windstorm exposure.
The 1-in100 year net exposures are $317m for US hurricane, $244m for European windstorm and $187m for US earthquake.