After witnessing high cataclysmic conditions for the first two quarters of the year, property and casualty insurer W. R. Berkley Corporation (WRB) announced that it expects pre-tax catastrophe losses, as a result of hurricane Irene and a slew of other catastrophes, in the range of $50 to $60 million for the third quarter 2011.
During the second quarter, adverse weather dented Berkley’s earnings by $63 million, which was also more than double of cat losses of $30 million incurred in the preceding quarter.
Other property and casualty insurers who suffered from bad weather during the third quarter include Assurant Inc. (AIZ), which has forecasted a pre-tax cat loss of $80 million to $85 million, and The Chubb Corp. (CB”>CB), which sees a significantly high catastrophe loss of $400 million to $475 million pre-tax.
According to the Insurance Information Institute property and casualty industry turned in a weak performance in the first half of the year, as profitability suffered amid high cat losses. In the third quarter, hurricane Irene along with other catastrophes is estimated to have caused insured losses of $3 billion to $4 billion to the industry.
Year-to-date weather related losses for the industry are expected to trend above $25 billion up $14.1 billion compared with the direct insured losses caused by catastrophes striking the United States in first-half 2010 and about three times the $7.7 billion average for first-half catastrophe losses during the past ten years.
Berkley will expectedly relate all the details on catastrophe losses in its third quarter earnings report, which is scheduled to be released on October 26, 2011, after market-close. The Zacks Consensus estimates Berkley’s third quarter earnings at 57 cents per share, which would translate into an expected earnings growth of 11.33% year over year.
Despite cat losses in the second quarter, Berkley’s results were positive, coming ahead of the Zacks Consensus estimate on the back of higher net premium written, coupled with high net investment income.
However, our outlook for the third quarter remains cautious given continued high cat losses, soft property and casualty market conditions and uncertainty in the investment markets. Berkley currently carries an Underperform recommendation. We may revisit our recommendation after the third quarter earnings release.
ASSURANT INC (AIZ): Free Stock Analysis Report
CHUBB CORP (CB): Free Stock Analysis Report
BERKLEY (WR) CP (WRB): Free Stock Analysis Report
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