Everest Re Group, Ltd.
), expects to incur a loss to the tune of $220 million due to
hurricane Sandy. This loss estimate is net of reinstatement
premium and taxes. This loss amounts to approximately 1% of the
total industry loss currently estimated at $20 to $25 billion.
Before it reached such rough estimates for the cat loss, Everest
Re had ceased its share repurchase program to pay for claims.
Since the company now has a fair idea of the amount of loss it
will incur from Sandy it has resumed the share buyback program.
For the first nine months of 2012, Everest Re had incurred $85.0
million of catastrophe losses, related to U.S. storms ($60.0
million) and Hurricane Isaac ($25.0 million).
However, these were small compared with $920.3 million of loss
incurred in the same time period in 2011.
Despite being subjected to cat loss from Sandy, Everest Re is
expected to post a favorable fourth quarter earnings given the
strength of overall pricing. A strong balance sheet, and
better-than-average underwriting performance will also shield the
company from any adverse developments.
Sandy, one of the top-10 most expensive U.S. hurricanes for
insurers, has also hit
The Travelers Companies Inc.
), which has 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.
Despite causing huge insured losses, Superstorm Sandy will not be
able to change the industry pricing trends. Losses caused by it
are not large enough to reduce the huge surplus capital base of
the industry. Although the event will increase insurance pricing
for the affected lines in impacted areas, a broad-based hardening
of rates is nowhere to be seen.
Additional details on the impacts of losses due to Sandy and
consequent update on share repurchase will be provided by the
company during its fourth quarter earnings release.
Till then, we maintain our long-term 'Neutral' recommendation on
the shares. The stock currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating.
ALLSTATE CORP (ALL): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
TRAVELERS COS (TRV): Free Stock Analysis
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