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
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