Shares of insurance companies mostly rose Tuesday as Wall Street assessed the smaller-than-expected damage of Hurricane Gustav and its resulting impact on the insurance sector.
Initial insured loss estimates for the storm are about $10 billion, said Stifel, Nicolaus & Co. analyst Meyer Shields in a note to clients.
"Although the storm is going to affect insurers' third-quarter 2008 earnings, we don't see this level of industrywide loss as anywhere near high enough to reverse declining property-casualty insurance rates," Shields wrote.
Standard & Poor's, meanwhile, said it doesn't believe the storm's magnitude will alter the creditworthiness of the industry as a whole and few, if any, rating changes will result. Aside from power outages, downed trees and some flooding in the region, Gustav's impact was far weaker than had been feared earlier this week.
"We expect that Hurricane Gustav, like many large hurricanes, will have a short-term impact on the industry," wrote Sandler O'Neill & Partners analyst Paul Newsome in a note to clients. "Most large hurricanes create significant losses for the insurers, but these losses are usually not large enough or unique enough to affect insurance prices."
Newsome lists Allstate Corp. as among the companies with the most exposure to the affected Gulf Coast region.
"The company has been reducing its exposure to catastrophe-prone areas such as the Gulf, but it remains the second-largest home insurer in the Gulf region," he said.
Allstate shares slipped 14 cents to $44.99 in afternoon trading.
Progressive Corp. also has significant market share in the region, Newsome said, but its exposure is exclusively from auto insurance, which doesn't tend to be impacted by storms as much as home insurance.
Progressive shares were flat at $18.47.
Other companies that have significant exposure to the region include The Travelers Cos., Chubb Corp., Hartford Financial Services Group Inc., American International Group Inc. and Safeco Corp., Newsome said.
Travelers gained 31 cents to $44.47, while Chubb added 3 cents to $48.04.
Hartford Financial rose $1.30, or 2.1 percent, to $64.38. Shares have traded between $53.20 and $99.21 in the past 12 months.
AIG jumped 75 cents, or 3.5 percent, to $22.24, while Safeco advanced 12 cents to $67.72. Shares hit a new 52-week high of $67.89 earlier in the session.
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