Bermuda-based White Mountains Insurance Group, Ltd. on Friday cancelled a proposed secondary offering of $165 million worth of Montpelier Re shares and instead sold the shares in a block trade to investment banks Banc of America Securities and Morgan Stanley.

White Mountains, with funds managed by Prospector Partners, LLC announced last Monday that they planned to sell approximately 4,785,540 common shares of Bermuda-based Montpelier Re Holdings Ltd. by announced late on Thursday that theyhad dropped the plan, citing unfavourable market conditions.

But a statement later on Friday said they have sold the share in a block trade to Banc of America Securities LLC and Morgan Stanley & Co. Inc. at a price of $34.50 per share.

"White Mountains indicated that Banc of America Securities LLC and Morgan Stanley & Co. Incorporated have offered the shares to the public at a price of $35.50 per share," the statement said.

In spite of the the block trade, White Mountains' beneficial ownership of shares of Montpelier will only decline to 13,472,357.5, as White Mountains has also indicated it intends to purchase currently exercisable warrants to acquire 2,390,785.8 shares of Montpelier from an existing warrantholder on March 15, 2004, meaning that White Mountains will still hold 18.4 percent of Montpelier's outstanding shares.

Insurance broker Benfield, which is also registered in Bermuda but has its operating headquarters in London, said it would receive $54 million from the sale of warrants of Montpelier Re Holdings, more than tripling its original investment in the Bermudan reinsurance company.

The warrants were to be sold to a unit of White Mountains, and entitled the buyer to 2.4 million shares in Montpelier, Benfield said.

White Mountains in the statement that the transaction was made in connection with an internal restructuring of its business.

"Together with additional steps White Mountains may take, a change in the treatment of its Montpelier investment under US generally accepted accounting principles may result," the White Mountains statement said.

"White Mountains has further indicated that, after giving effect to both the sale of the shares and the acquisition of the warrants, its fully converted ownership percentage of Montpelier common shares will be approximately 18.4 percent.

Montpelier shares fell 26 cents to $34.69 in New York Stock Exchange composite trading on Friday. White Mountains stock dropped $8.75 to $476.

White Mountains was one of Montpelier's initial investors, backing the company with $200 million of Montpelier's total $1 billion in initial funding.