February 8, 2008

MontpelierRe a Buy, Pre-Earnings

Reinsurance company MontepelierRe (MRH) intends to release its 4Q07 results after the market close on February 19, 2008, with a conference call scheduled for the next day. The company's results, as of late, have benefited from a relatively benign catastrophe event environment, partially offset by the impact of the expenses associated with its initiatives roll-outs.

From Zacks:

While we suspect investors remain concerned with respect to MRH's investment portfolio, we view Fitch's recent one-notch upgrade a positive for the company, given the broader subprime mortgage overhang. The company continues to remain focused on the future; as such, revenues should grow from additional acquisitions and office expansions and recent initiatives during the ensuing years.

Thus, we continue to rate the shares a Buy. Our new six-month price target of $20.55 per share (down from $20.75 per share previously), incorporates a blended current peer 1.10x price-to-book multiple (down from 1.15x previously), to our estimated book value of $18.70 per share at June 30, 2008. This would imply a six-month total return of 20.3% (1.7% annualized dividend yield + 19.8% capital appreciation).

MontpelierRE is also a MF Hidden Gems Pick and a Stock Advisor pick. Disclaimer: I own shares of MontpelierRE.

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