Montpelier Re (NYSE:MRH) reported another strong quarter despite a series of floods in the U.K. and Australia. However, it doesn't seem the stock market appreciates it much, because Montpelier trades at an enticingly low premium to book value.

For the quarter, Montpelier Re's operating income was roughly flat at $54 million. However, this was achieved despite a 15% drop in earned premiums to $129 million, due to a 290-basis-point improvement in the combined ratio to 70%. Helping the quarter was a whopping 15.2% worth of favorable reserve development, which was partly offset by a 150-basis-point increase in the expense ratio.

Although results are still preliminary, Montpelier booked only a $31 million loss for the Australian and U.K. floods. Premiums written fell as Montpelier put its Blue Ocean sidecar into runoff, as well as experiencing softening prices. However, the company opened up a Lloyd's syndicate in order to write non-catastrophe lines, help diversify its risk exposures, and help grow premiums in the long-term.

Once again, pricing has softened on a lack of loss events and abundant insurance and reinsurance capacity. The company noted that average renewal prices for July were down 9%, with prices down across the board.

Management addressed the obligatory subprime exposure concerns and noted that subprime investments were only $41 million, with $17 of that guaranteed by a mortgage insurer.

Montpelier also calculated its fully converted book value, after repurchasing $65 million worth of shares and warrants from White Mountains (NYSE:WTM) at $16.04, meaning the shares actually trade at a slight discount to book value. This is in comparison to peers such as XL Capital (NYSE:XL) and RenaissanceRe (NYSE:RNR), which trade at 30% and 60% premiums to book value respectively.

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.