Home and auto insurer,
) announced its pre-tax catastrophe (CAT) estimates for October
2012 yesterday, stating that it expects losses of over $150
million. However, a final estimate is yet to be computed.
The loss primarily includes the damages created by Hurricane
Sandy on the north-east of the US, where Allstate owns about
10.7% of the market share. Disaster modelling firm, RMS projects
insured losses of $20-25 billion related to the superstorm in the
In order to generate greater transparency, since last year
Allstate has started disclosing its quarterly and monthly CAT
loss estimates if the amount exceeds $150 million in any
CAT Loss Mars Earnings
Severe weather-related adverse events have become a growing
concern for insurers and reinsurers in recent years. The
weather-pattern changes have resulted in regular occurrence of
floods, earthquakes, hurricanes, hailstorms, tsunami etc.
Over the past few years, CAT losses have not only been
augmenting the claims payments of the insurers but also has been
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 Allstate,
Hartford Financial Services Inc.
The Travelers Companies
) saw most or all of their earnings being washed away after
incurring severe CAT losses in 2011.
Although CAT losses moderated in the first nine months of 2012
and also helped the bottom line regain stability, the recent
hurricane Sandy is expected to erode the insurers' earnings once
The Chubb Corp.
) deferred its share buyback program due to the inability to
estimate the extent of loss related to the recent catastrophe.
More insurers are expected to release their CAT losses soon.
Estimate Trend Revision
Over the last 30 days, 15 out of 22 analysts covering the
stock 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 operating
earnings of 34 cents per share, which would plunge by about 77%
from the year-ago quarter.
Overall, though continued synergies are expected from
Allstate's industry-leading position, diversification and pricing
discipline, we believe that the current volatile economy will
continue to impact its expenses 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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