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ACE Limited's Cat Loss Guidance

ACE MRH

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ACE Limited (ACE - Analyst Report) expects loss from Superstorm Sandy to approximate $380 million after tax, net of reinsurance and including reinstatement premiums in the fourth quarter of 2012.

The estimate includes losses stemming from the commercial and personal property and casualty insurance businesses as well as its reinsurance operations.

Concurrently, it revised its full year 2012 earnings expectation to $7.43 – $7.53 per share. The guidance is lowered from the prior expectation of $7.73–$8.03 per share to accommodate the higher-than-expected catastrophe loss. The Zacks Consensus Estimate for 2012 is currently pegged at $7.65, above the company guidance. Also, it represents a year-over-year improvement of 9.7%.

During the third quarter conference call, ACE Limited raised its full year 2012 operating earnings expectation to a band of $7.73–$8.03 per share, up from $7.20–$7.60 per share guided earlier. The guidance includes catastrophe loss of $100 million in the fourth quarter.

The company posted strong results in each of the three quarters in 2012 aided by lower catastrophe activities. However, the final quarter might show a different picture due to the impact of Hurricane Sandy. Loss modeling companies project the amount to be approximately $20–$22 billion.

The first two quarters enjoyed year-over-year increases in underwriting profit along with improvement in combined ratio. However, the third quarter experienced a decline in underwriting profit and deterioration in combined ratio.

Another property and casualty insurer, Montpelier Re Holdings Ltd. (MRH - Analyst Report), announced its expectations of pretax net loss from Superstorm Sandy in the fourth quarter of approximately $95 million, net of reinsurance recoveries and reinstatement premiums.

ACE Limited and Montpelier, both carry a Zacks #3 Rank, translating into a short-term Hold rating.

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