ALL Allstate Corporation

Property and casualty insurer W. R. Berkley Corporation (WRB) announced that it expects pre-tax catastrophe losses (cat losses) of $65 million for the months of April and May, based on property damages resulting from cataclysmic weather conditions.

The new estimate is significantly greater than the company’s budgeted expectation of second quarter cat loss of $35 million. During the first quarter, Berkley reported cat losses of $24 million compared with $23 million in first quarter 2010. Cat losses in the first quarter included regional storm losses of $9 million and estimated $15 million for potential losses from earthquakes in Japan and New Zealand and floods in Australia.

Other insurers and reinsurers who suffered losses from the early 2011 catastrophe include companies like Allstate Corp. (ALL) and Travelers Companies Inc. (TRV). Allstate has been reported to incur the highest amount of cat loss ($2.0 billion), with State Farm ($1.75 billion) and Travelers ($1.05 billion) closely behind.

Berkley will expectedly relate all the details on catastrophe losses in its second quarter earnings report, which is scheduled to be released on July 25, 2011, after the closure of the market. The Zacks Consensus estimates Berkley’s second quarter earnings at 62 cents per share. We expect second quarter earning to be adversely affected by higher-than-expected cat losses, and therefore it might trend below our estimate.

Analysts forecast cat losses for the industry to range between $7.7billion and $12.5 billion for April-May. According to them, insurers overall have already incurred heavy cat loss, which is almost twice the figure earlier predicted for full-year 2011. Since the spate of serious catastrophe losses has becomes a major issue for the global reinsurance community, we expect rates to harden and pricing pressure to increase in the insurance industry after years of sharp pricing declines.

 
ALLSTATE CORP (ALL): Free Stock Analysis Report
 
TRAVELERS COS (TRV): Free Stock Analysis Report
 
BERKLEY (WR) CP (WRB): Free Stock Analysis Report
 
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