Last week, home and auto insurer
) announced its pre-tax catastrophe (CAT) and net of reinsurance
loss estimate to jump to $1.08 billion for October 2012. The loss
occurred from five events, primarily Hurricane Sandy in the
Northeast US, where Allstate owns about 10.7% of the market
Accordingly, 66% of the gross loss due to Sandy came from New
York, while the remaining 20% and 14% rose from New Jersey and
other states, respectively. Allstate has already paid about $340
million as claims until November 2012.
Moreover, the company's auto segment has been marred most by
the superstorm Sandy, accounting for 40% of the gross losses.
About 78% of these losses represent those from New York, 19% from
New Jersey and remaining 3% from other states.
Industry Loss of $20-$25 Billion
Another reinsurer, Swiss Re Ltd. estimated its claims payments
of over $900 million against the recent catastrophe.
The Chubb Corp.
) deferred its share buyback program due to its inability to
estimate the extent of loss related to the recent superstorm.
Other insurers such as
The Travelers Companies
), have notified that the catastrophe losses from Sandy are
higher than their absorbing capacity. Most disaster analysis
companies such as AIR Worldwide, Eqecat and RMS have pegged the
CAT losses from Sandy between $20 billion and $25 billion.
Over the past few years, catastrophe losses are not only
augmenting the claims payments of the insurers but also nibbling
into the earnings of the companies, thereby distorting the
operational dynamics for quite some time, post the
weather-related events. Several insurers such as
Hartford Financial Services Inc.
), Travelers and PartnerRe saw most or all of their earnings
being washed away after incurring severe catastrophe losses in
Although catastrophe losses moderated in the first nine months
of 2012 and helped the bottom line regain stability, the recent
Hurricane Sandy is expected to erode the insurers' earnings once
again. Meanwhile, CAT losses from 19 events stood at $216 million
in the fourth quarter of 2011, which is way lower than the
current October loss estimate of $1.08 billion. More insurers are
soonexpected to release hefty CAT losses for the last quarter of
Estimate Trend Revision
Over the last 30 days, 18 out of 23 analysts covering the
Allstate have reduced their estimates for the fourth quarter of
2012, while no upward revision was witnessed. Currently, the
Zacks Consensus Estimate for the fourth quarter is pegged at 11
cents per share, which would plunge by about 92% from the
year-ago quarter. Consequently, earnings are expected to plummet
191% over 2011 to $3.84 per share in 2012.
Although continued synergies are expected from Allstate's
industry-leading position, along with diversification and pricing
discipline, the current volatile economy and CAT losses will
continue to impact its margins and income until the markets
regain momentum. Consequently, Allstate carries a Zacks Rank #3,
which implies a short-term Hold rating.
ALLSTATE CORP (ALL): Free Stock Analysis
CHUBB CORP (CB): Free Stock Analysis Report
HARTFORD FIN SV (HIG): Free Stock Analysis
PARTNERRE LTD (PRE): Free Stock Analysis
TRAVELERS COS (TRV): Free Stock Analysis
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