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Hurricanes Rip Through Insurers' Profit
NEW YORK, Sept 27 (Reuters) - As Hurricane Jeanne fizzles
out in north Florida, insurers are facing as much as $25 billion in claims
from four major storms, likely making this year the most costly on record
for hurricanes.
That may not bankrupt any insurance companies, but it will tear a hole
in third-quarter and full-year profit. "Certainly, most companies'
earnings will be adversely affected by the storms, with anywhere from
one quarter's to one year's earnings being absorbed by the losses,"
said Thomas Upton, a credit analyst at rating agency Standard & Poor's.
In the front line are car and home insurers Allstate Corp., St. Paul Travelers
Cos., Chubb Corp., and SAFECO Corp., which all said hurricane losses would
cut profit even before Jeanne swept onshore this weekend.
Beyond them, a range of reinsurers in the United States, Bermuda and Europe
will pick up a slice of the claims.
Jeanne will cause as much as $8 billion in claims, forecasters said on
Monday. Together with Hurricanes Charley, Frances and Ivan, insurers are
looking at as much as $25 billion in claims, according to Risk Management
Solutions (RMS), which makes computer models to forecast damage.
If claims go that high, it would make this year the most expensive on
record for storms, surpassing the $22 billion, adjusted for inflation,
that insurers paid out for Hurricanes Andrew and Iniki in 1992.
The S&P Insurance index slid 1.1 percent on Monday, adding to a steep
decline over the past 10 days. However, many stocks are holding off lows
set in mid-August as investors hope large claims will lead to higher premium
rates, or at least a halt in declines.
BAD NEWS ON EARNS
Almost every major property insurance company that does business in the
Southeast United States will get a hit from the hurricanes. "Investors
should expect the property-casualty insurers to be continuously pre-announcing
hurricane losses," said A.G. Edwards insurance analyst Paul Newsome
in a research note on Monday.
Aside from the main U.S. insurers, the new crop of Bermuda-based reinsurers
face a significant share of losses. In Europe, the Lloyd's of London insurance
market [LOL.UL] is expecting more than $500 million in claims from Hurricane
Charley alone, according to its latest estimates.
The world's largest reinsurer, Munich Re (MUVGn.DE:) , said it expected
about $615 million in claims even before Jeanne, but stood by its year
profit target. The world's No. 2 reinsurer, Swiss Re (RUKN.VX:) is expecting
almost $600 million from recent storms around the world, casting doubt
on its ability to reach its full-year profit target. Germany's Hannover
Re (HNRGn.DE:) has already said it expects year profit near the bottom
of its target range after the first three U.S. storms. (Additional reporting
by Simon Challis in London) © Reuters 2004.
last updated:
September 29, 2004
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Diversified Risk Insurance Brokers
phone: 510/547-3203 fax: 510/547-5648
5900 Christie Ave
License # 0529776
Emeryville, California 94608
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