Cat Loss to Mar Chubb's 2Q Earnings - Analyst Blog

U.S. property and casualty insurer Chubb Corp. (CB) fears that catastrophe losses will cut into its second quarter earnings by approximately $240 million before tax. On an after tax basis, the loss will come down to $156 million or 60 cents per share.

Out of the total pre-tax loss estimate, $175 million stems from the severe storms in the central states that occurred in May and June this year. The company also incurred $65 million from storms and flooding in southern Alberta, Canada.

Chubb's estimated pre-tax cat loss in second quarter of 2013 exceeds pre-tax cat loss of $223 million (53 cents per share after tax) incurred in the prior year quarter but remains way below $329 million before tax (72 cents per share after tax) incurred in the second quarter of 2011. Cat loss in the prior year quarter largely stemmed from severe hail and wind storms from 13 catastrophe events in the United States.

Aon Benfield estimates total economic losses were estimated around $3.8 billion. A preliminary insured loss estimate anticipated payouts to be at least $1.0 billion. While June economic cost of severe thunderstorms was expected to be more than $1.0 billion, with insured losses in excess of $500 million.

Despite being subjected to cat loss volatility the company has been able to produce profitable results. Chubb's better-than-average underwriting performance has shielded its earnings.

In the last reported quarter, Chubb's earnings per share breezed past the Zacks Consensus Estimate by 23% and improved 26% year over year. However, the second quarter will likely face the brunt of catastrophes, which would weigh on its underwriting results as well as the bottom line. The Zacks Consensus Estimate for the second quarter is pegged at $1.59.

Recently, XL Group plc (XL), another property and casualty insurer, expects pretax loss from catastrophes in the second quarter! of 2013, net of reinsurance and reinstatement premiums, likely to be approximately $135 million.

Chubb carries a Zacks Rank #4 (Sell). Alleghany Corp. (Y) and State Auto Financial Corp. (STFC), among others, with Zacks Rank #1 (Strong Buy) look impressive