After witnessing benign catastrophe loss during the first nine
months of 2012, property and casualty insurer
) is set to incur pre-tax cat losses in the range of $200-$220
million in the fourth quarter of 2012. The entire loss is
attributed to Hurricane Sandy, which battered the Northeast Coast
in October this year.
These cat losses will affect Assurant's largest business - the
Specialty Property segment - which accounts for 60% of the
company's operating earnings. The segment incurred $17.9 million
in cat losses in the third quarter of 2012.
Assurant's margins appear to be more volatile than previously
expected due to its increased exposure to coastal and
catastrophe-prone regions. For this, the company maintains an
active catastrophe reinsurance program. In June 2012, the company
renewed its comprehensive three-layer reinsurance agreement.
Assurant's CAT reinsurance agreements are part of the
company's catastrophe management strategy, which aims to provide
the shareholders an acceptable return on the risks assumed in its
property business and reduce variability of earnings while
protecting its customers.
ASSURANT INC (AIZ): Free Stock Analysis
ALLSTATE CORP (ALL): Free Stock Analysis
CHUBB CORP (CB): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis
BERKLEY (WR) CP (WRB): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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Assurant's fourth quarter 2012 earnings, scheduled to release on
February 6, 2013 after the market closes, will be modestly
affected by cat losses. According to the Zacks Consensus
Estimate, the company's fourth-quarter earnings per share (EPS)
would be 65 cents, down 60.72% from the year-ago period.
Other insurers that are expected to suffer losses from Hurricane
The Travelers Companies Inc.
), having significant homeowners and commercial property
exposures throughout the East Coast. Furthermore,
The Allstate Corp.
), the second-largest homeowners' insurance underwriter, has a
substantial exposure to Sandy.
W.R. Berkely Corp.
XL Group plc
The Chubb Corp.
) are some of the carriers that witnessed losses to a
comparatively lesser extent.
Assurant retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Considering the fundamentals, we are also
maintaining our long-term Neutral recommendation on the company's