Cat Loss to Mar AXIS Group 2Q

Zacks

Recently, AXIS Capital Holdings Limited (AXS) provided its estimates for loss from catastrophes for the second quarter of 2013. According to the company, pretax loss from catastrophes in the second quarter of 2013, net of reinsurance and reinstatement premiums, will likely be approximately $140 million.

The Insurance segment of AXIS Capital will incur almost 64% of the estimated loss, while Reinsurance will incur the remaining 36%. Pre-tax net losses for the Insurance segment are estimated at $90 million due to tornadoes and hailstorms in the U.S. and flooding in Argentina and Canada. Pre-tax net losses for the Reinsurance segment are estimated at $90 million, stemming largely from flooding in Europe and Canada.
    
XL Group plc (XL) expects to record a catastrophe loss of $135 million in the second quarter of 2013, resulting from floods in Europe, Argentina and Canada, and tornadoes and hailstorms in the United States. Another insurer, The Chubb Corporation (CB) expects after-tax cat loss to be $156 million or 60 cents per share in the second quarter. Chubb’s pre-tax cat loss estimate of $240 million includes $175 million from catastrophes in the United States, largely stemming from severe storms in central U.S., and $65 million from storms and floods in southern Alberta, Canada.

According to Impact Forecasting, industry loss from the European flooding is estimated to approximate $5.3 billion. It also projected combined economic losses to be as much as $22 billion. In addition, reinsurer Munich Re projected that the industry would incur $3.9 billion in insured losses due to the European flooding.

While Impact Forecasting projected total economic losses from flooding in Canada to be approximately $3.8 billion, preliminary insured loss is expected to be $1.0 billion. Impact Forecasting is the catastrophe model development center of excellence at Aon Benfield. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (AON).

In the last reported quarter, AXIS Capital’s earnings per share breezed past the Zacks Consensus Estimate by 61% and surged 79% year over year. Underwriting income of AXIS Capital increased nearly threefold year over year to $170.8 million in the quarter. The combined ratio improved 1180 basis points to 83% in the quarter.

However, AXIS Capital, in 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 $1.15 per share.

AXIS Capital carries a Zacks Rank #2 (Buy).

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