Deutsche initiates Montpelier Re at Buy; cuts XL to Sell

"Our current assumption is that Montpelier Re (MRH) habitually over-reserves for losses at a trend of about 25.0% per annum, leading us to assume that reserves at the company are overstated by about $450 million," says analyst Joshua Shanker, starting the stock at a Buy with $37.50 price target. One year from now, he expects reported book value per share of $30 and $400M in overstated reserves, leaving reported book value underestimated by about $7.50 per share.

"We have some concern that XL's habitual tendency to over-reserve for losses with a trend equating to 7.5% of reserves may have been compromised if loss-picking has indeed become aggressive," he says, cutting XL Group to Sell with $26 price target (from $33).

AXIS Capital (AXS) is cut to Sell with $40 price target (from $45), and Everest Re (RE) is cut to Hold with $167 price target.

Previous: Goldman cuts Everest Re

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