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US Property Insurers Expect Rising 3Q Earnings

Source: WSJ

Posted on 13 Oct 2009

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Most of the U.S. was spared damage from major storms this summer, which will help boost third-quarter earnings for Property/Casualty insurers.

Investment results will also be "respectable" following the rise in markets during the quarter, says Sandler O'Neill & Partners analyst Paul Newsome in a recent note. Some issues that raised investor anxiety in the past, such as an increase in lawsuits over liability issues or new profit-reducing regulations, should be absent.

Look for some insurers to beat expectations in a solid quarter. Analysts have been raising estimates for quite a few insurers in recent weeks to reflect high expectations.

Growth in book value, a measure of the value of a company's net assets, will approach double digits for some insurers, says Fox-Pitt Kelton's research group. But healthy profits will likely put more pressure on insurers to keep prices low, which could hurt future quarters.

American International Group Inc. (AIG), the largest commercial insurer, usually releases its earnings later in November than most of its peers, but hasn't yet announced the date. Currently, analysts surveyed by Thomson Financial expect an operating loss of $4.08 a share in the quarter, compared to a loss of $68.40 a share in the quarter last year, after adjusting for AIG's 1-for-20 reverse stock split in July. AIG's 2008 losses were driven by market value losses in its portfolio of credit derivatives and investment losses.