Bermuda reinsurer Montpelier Re Holdings Ltd. last night announced net income of $70 million for the second quarter, as it took a $20 million hit from the Deepwater Horizon oil rig explosion.

The profit broke down to 96 cents per share and was down by nearly $90 million from the $159 million recorded in the April through June period last year.

Operating results improved compared to last year, with operating earnings of share of $1 up 28 percent compared to last year.

The main reason for the fall in net income was the comparison with last year's unrealised investment gains of $85.6 million during a resurgent period for the markets. This year, Montpelier booked an unrealised investment loss of $4.1 million.

Montpelier wrote $199.5 million in gross premiums, representing an eight percent increase from last year.

The company said it had seen a decrease in the Bermuda property catastrophe book that was more than offset by increases in its US and Lloyd's operations.

The company's combined ratio — the percentage of premium dollars spent on claims and expenses — was 59.8 percent, an improvement compared to the 61.5 percent achieved last year.

The ratio benefited from $39 million in net favourable development from prior years' loss reserves, but was impacted by the $20 million loss related to the Deepwater Horizon explosion, which was in line with previous announcements. There was no change in the first-quarter estimated net loss for the Chilean earthquake.

"We produced a strong quarter with solid underwriting results and steady investment performance resulting in 4.9 percent growth in book value per share," said Montpelier's president and chief executive officer Christopher Harris. "The mid-year renewal season was challenging, and we reduced some catastrophe exposures accordingly. However, we also identified some attractive growth opportunities in our US and UK platforms, most notably within our Marine book."

Mr Harris added that the company had grown shareholders' equity over the past year, while repurchasing 20 percent of outstanding shares at a discount to book value per share.

"We enter the US hurricane season in a strong capital position, and we continue to consider share repurchases an integral part of our cycle management strategy," he added.

Montpelier initiated a fresh $100 million share repurchase programme in late June and repurchased 250,000 shares during the second quarter at an average price of $15.01. The Company has repurchased a further 743,700 shares in July at an average price of $15.12. Montpelier's total capital was $1.95 billion as of June 30, 2010.