Sandy Isn't Going to Destroy These Insurershttp://www.fool.com/investing/general/2012/12/10/sandy-isnt-going-to-destroy-these-insurers.aspx Eric Volkman
December 10, 2012
Hurricane Sandy was a nasty beast; in fact, it's quickly on track to become one of the nation's most destructive storms ever, in terms of property destruction. This, of course, means billions of dollars in insurance claims and depressed results for the insurance companies having to cover them. Luckily for Travelers (NYSE: TRV) and Hartford Financial Services (NYSE: HIG), not all insurers will be hit as hard as some feared. But at least a few of their rivals will have to absorb much harder body blows.
Nice umbrella you've got there
If Eqecat's numbers are right, Sandy would be right behind Katrina (total damage: $106 billion) and just ahead of 1992's Andrew, which took out big parts of Florida and the Bahamas.
With those numbers, you'd think that insurers are going to take a massive hit in the storm's wake. Not necessarily. Travelers said its losses from paying claims arising from the storm would amount to a net $650 million. Given the size of the company and the power of Sandy, that ain't much. The pre-tax, and pre-reinsurance estimate is $1.135 billion, meaning the company is well covered by the latter.
Travelers has dodged a powerful bullet. Now that it's not going to completely lose its shirt in the quarter, it's expressing its relief by paying its investors in the form of a share buyback program it suspended just after the storm wreaked its havoc. Clearly, the company was girding for a much worse 4Q than it's going to get.
The 5% jump the stock experienced the day the news was announced was the market's way of wiping its brow -- the Dow, by comparison, basically traded flat that day.