Montpelier Re Holdings saw its profits drop by more than $30 million for the fourth quarter 2007, despite net income being up for the year.

The Hamilton-based resinsurance company's net income for the fourth quarter declined from $122.1 million in 2006 to $90.5 million for the same period last year. Annual profits rose from $302.9 million in 2006 to $315.8 million last year.

The loss ratio for the quarter was 20.8 percent, which includes $10 million, or 6.8 points, of losses incurred as a result of the California wildfires in October. This was offset in part by net favourable prior year reserve development of $4.1 million, or 2.8 points. The combined ratio for the quarter was 52.9 percent and for the year was 61.3 percent compared to 60.3 percent in 2006.

The total return on the consolidated investment portfolio was 1.2 percent for the fourth quarter and 5.7 percent for the full year. The company stated that it has minimal sub-prime exposure.

Anthony Taylor, chairman and CEO, said: "This was a robust finish to another strong year resulting in a 5.4-percent increase in book value per share for the quarter and 17.6 percent for the year. Since the beginning of 2006, we have grown book value per share by over 55 percent, inclusive of dividends. "Notwithstanding the $12 million of expenses related to the roll-out of our new Lloyd's, European and US platforms, the combined ratio for the year was a very strong 61.3 percent, reflecting what turned out to be a relatively light catastrophe year. From a strategic perspective, we have successfully established our expanded operating platforms, which will make their initial contribution to the top line in 2008, although it will take a little longer before they contribute positively to earnings.

"On another note, several large individual risk losses have occurred within the first 50 days of 2008, which in the aggregate will produce a sizeable industry loss to the commercial property insurance market. Based on current information, we expect to incur total net losses of $30-$40 million from some of these events."