Chubb Ups 2Q Cat Loss Estimate - Analyst Blog
June 21 2011 - 8:30AM
Zacks
Property and casualty insurer Chubb Corporation
(CB) has made an upward revision to its
preliminary estimate of second quarter 2011 catastrophe losses (cat
losses) based on property damages resulting from cataclysmic
weather conditions in the months of April and May.
After the revision, the company expects pre-tax cat losses in
the range of $250 million to $310 million. Chubb stated that its
pre-tax losses for May were about $75–$85 million, in addition to
the $175–$ 225 million catastrophe losses incurred during April,
which was due to storms in the southern states of the U.S. In the
month of May, the company was affected by unprecedented
tornadoes.
Chubb’s geographic concentration exposes it to catastrophe
losses. Compared with 2009, the company witnessed less profitable
results in 2010 owing to a substantially higher impact of
catastrophe losses. Similarly, the more profitable results were
recorded in 2009 compared with 2008 due to a significantly
lower catastrophe losses, partly offset by a lower amount of
favorable prior-year loss development. The impact of catastrophes
accounted for 570 basis points of the combined ratio in 2010 as
against 80 basis points in 2009 and 510 basis points in 2008.
The catastrophe losses, incurred early during the year, will
expectedly drain Chubb’s second quarter 2011 earnings by 55–68
cents per share after tax.
Other insurers and reinsurers who suffered losses from the early
2011 catastrophe include companies like Allstate
Corp. (ALL) and Travelers Companies Inc.
(TRV). While Allstate anticipates net losses of $2.0 billion,
Travelers estimates April and May cat losses to range between $1.0
billion and $1.05 billion.
Chubb will provide all the details regarding catastrophe losses
in its second quarter earnings report, which is slated to be
released on July 21, 2011, after the market closes.
Experts predict that the April-May cat losses would cost about
$7.7–$12.5 billion to the industry. According to them, the insurers
overall have already incurred heavy cat loss, which is almost twice
the figure earlier predicted for full-year 2011. We expect the
market to harden as severe natural disasters this year are pushing
prices higher in the insurance industry after years of sharp
pricing declines.
ALLSTATE CORP (ALL): Free Stock Analysis Report
CHUBB CORP (CB): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
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