RenaissanceRe Holdings Ltd.
) announced its initial estimate of a net negative impact of $130
million on its fourth quarter 2012 financial results due to
losses arising from Hurricane Sandy. The estimate includes the
expected claims and claim expenses incurred, earned reinstatement
premiums assumed and ceded, lost profit commissions, redeemable
non-controlling interest - DaVinciRe, and other income relating
to ceded reinsurance contracts accounted for at fair value.
The initial estimate is derived on the basis of
RenaissanceRe's preliminary talks with some counterparties, its
assessment of possible exposures and catastrophe modeling
techniques. However, the estimate is expected to be revised as
the hurricane occurred recently and only a small amount of claims
data is available as of now.
Moreover, the magnitude of the storm and the legal issues
related to it, the contingent nature of business disruption and
other exposures, the abnormal complexity of the coverage and
doubts intrinsic to loss estimation make it difficult to
accurately estimate the total covered losses for the insurance
industry from the hurricane. Thus, RenaissanceRe will likely
revise the estimated negative impact once new or more accurate
data is available. Such estimate revision will be recorded by the
company in the accounting period in which the revision is
Currently, the Zacks Consensus Estimate for RenaissanceRe's
fourth-quarter earnings stands at 72 cents, plunging 34.93% from
the year-ago quarter. Additionally, the Zacks Consensus Estimate
for 2012 earnings is about $7.96 per share, surging 347.23% over
the 2011 level. The company's full-year results will also be
impacted by the hurricane.
Hurricane Sandy has also affected many property-casualty
insurers such as
Hartford Financial Services Group Inc.
American Financial Group Inc.
The Travelers Companies Inc.
). While most property-casualty insurers were benefiting from
comparatively lower catastrophe levels in the first three
quarters of 2012, Hurricane Sandy changed the scene. Some of
these insurers, such as Hartford, American Financial, Allstate
and RLI, have already announced their loss estimates due to
RenaissanceRe carries a Zacks #3 Rank (Hold). We maintain a
long-term 'Neutral' recommendation on the stock.
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