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Yesterday, Hartford Financial Services Group Inc. (HIG - Analyst Report) disclosed its initial estimate of losses incurred due to Hurricane Sandy. The company expects to record pre-tax gross losses and loss adjustment expenses of around $370 million due to the superstorm. Meanwhile, pre-tax losses and loss adjustment expenses net of reinsurance are estimated to be near $350 million.

The proportion of losses is tilted toward Hartford’s Property and Casualty Commercial segment, which witnessed almost 60% of the abovementioned losses, while the Consumer Markets segment recorded the remaining 40%. Thus, the bottom-line results of both these segments for the fourth quarter and full year 2012 are expected to be substantially impacted.

Moreover, as these segments contribute the major portion of Hartford’s earnings, the company’s fourth quarter operating results are likely to be disappointing. Currently, the Zacks Consensus Estimate for the company’s fourth quarter earning stands at 38 cents, down 44.26% year over year.

Additionally, the Zacks Consensus Estimate for Hartford’s 2012 earnings is about $2.68 per share, up 38.25% over the year-ago level. Both these Zacks Consensus Estimates are expected to be revised once the analysts adjust their estimates to account for the company’s projections.

Meanwhile, Hartford also revealed that its initial estimate for post-tax net catastrophe losses incurred in the first two months of the fourth quarter stands at about $230 million. Thus, after including December’s catastrophe loss, the fourth quarter catastrophe loss should be higher than that of the first three quarters’ combined catastrophe loss of $241 million.

While most property-casualty insurers were benefiting from comparatively lower catastrophe levels in the first three quarters of 2012, Hurricane Sandy changed the scene. The devastation caused by this superstorm is expected to substantially increase the fourth-quarter catastrophe loss of property-casualty insurers such as American Financial Group Inc. (AFG - Analyst Report), The Travelers Companies Inc. (TRV - Analyst Report), Allstate Corporation (ALL - Analyst Report), Progressive Corp. (PGR - Analyst Report) and RLI Corp. (RLI - Analyst Report).

Some of these insurers, such as American Financial, Allstate and RLI, have already announced their loss estimates due to Hurricane Sandy. As a result of the losses from Sandy, American Financial also tightened its guidance range for core net operating earnings in 2012 to $3.10–$3.30 per share from $3.10–$3.50 projected earlier.

Hartford is expected to release its fourth quarter and full year 2012 financial results after the closing bell on Feb 4, 2013. The company currently carries a Zacks #5 Rank (Strong Sell). Travelers Companies, Allstate, Progressive Corp. and RLI carry a Zacks #3 Rank (Hold), whereas American Financial carries a Zacks #2 Rank (Buy).

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