Blue Capital increases quarterly contribution to Montpelier Re premiums

Third-party capital and reinsurance-linked fund management firm Blue Capital Management has grown its contribution of net reinsurance premiums written and earned to parent company, Bermudian reinsurer, Montpelier Re’s latest quarterly financial results. The increase will be welcome as Montpelier Re suffered a quarterly loss due to investment losses.

The Blue Capital division contributed $19.6m in premiums written during the second-quarter, up 34% from $14.6m in Q1. That’s just under 10% of Montpelier Re’s $197.8m premiums written for the quarter. In terms of premiums earned, Blue Capital contributed $5.5m for Q2, up 44% on the $3.8m premiums earned in Q1 of this year.

Montpelier Re as a whole suffered a net loss for the second-quarter, driven largely by the $77m impact of net realized and unrealized losses from investments and foreign exchange. Overall the net loss for the quarter was $23.2m.

Christopher Harris, President and Chief Executive Officer, commented on the results; “In a quarter marked by several industry catastrophe loss events and increasingly competitive market conditions, our insurance teams turned in another strong operating performance. Both our Bermuda and London platforms produced solid profitability and executed well in the important mid-year renewal cycle. We are well positioned to continue executing our focused underwriting and capital management strategy in the second half of 2013.”

Montpelier Re has actually beaten expectations this quarter, returning an operating income per share of $0.93, which is significantly up on the $0.74 delivered a year earlier. The impact of investment losses has hit the reinsurer hard but analysts and shareholders will be pleased with its overall performance.

Premiums written as a whole for Montpelier Re were down slightly in Q2 at $197.8m compared to $210.8m for Q2 2012. This could be due to the more competitive market conditions cited by CEO Harris above, as the reinsurer will likely have found risk selection tougher than a year earlier due to increased competition from well capitalised reinsurers as well as the new capital markets entrants. The recent declines in catastrophe reinsurance pricing may also have influenced this and the drop in premiums written could be strategic to some degree.

For Blue Capital Management to increase its contribution to Montpelier Re’s premiums at this time will be welcomed by its parent company, particularly as market conditions have not been so easy, and shows the value a third-party capital management strategy can bring to a reinsurer. This will be closely watched by other reinsurers who are thinking about entering the ILS and capital management space.