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Chubb (CB) Provides Q4 Catastrophe Loss Estimate of $195M

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Chubb Limited (CB - Free Report) recently released its preliminary net loss estimates of about $225 million pretax or $195 million after tax, net of reinsurance including reinstatement premiums. The loss can be attributed to the California wildfires, occurring in November this year, having destroyed thousands of residential and commercial properties. The insurer’s fourth-quarter results will likely be affected by these losses.

The estimates also include losses generated from the company’s commercial and personal property and casualty insurance businesses and its reinsurance operations. It is important to note here that the aforementioned loss projections exclude losses stemming from Hurricane Michael or other weather events occurring worldwide during the fourth quarter.

Per the estimates released by Moody’s in the Insurance Journal, the total insured losses (from the California wildfires) of property/casualty insurers and reinsurers can range between $10 billion and $15 billion. Moreover, according to Moody’s, the insured losses are anticipated to reduce fourth-quarter earnings for primary insurers and reinsurers but will remain within estimated levels.

In November, catastrophe modeling firm Risk Management Solutions Inc. projected losses from the wildfires to be in the range of $9-$13 billion, which will include property and auto damage, business interruption, additional living expenditure and contents loss. Interestingly, Moody’s estimates came in line with the abovementioned forecasts by the catastrophe modeler.

Additionally, per the industry data provider CoreLogic, total losses resulting from the wildfires in Norther and Southern California can vary between $15 billion and $19 billion.

Chubb’s status as a P&C insurer has made it fairly susceptible to loss from natural disasters, man-made catastrophes and other weather-oriented events. This has further caused volatility in its underwriting results.

In the first nine months of the current year, the property and casualty (P&C) insurer suffered catastrophe losses of nearly $1 billion, noticeably lower than $2.3 billion incurred in the same period of 2017. However, with the incident of the California wildfires and other weather-related events, the insurer’s fourth-quarter results might be adversely impacted.

Shares of this Zacks Rank #3 (Hold) P&C insurer have lost 8.6% year to date against the industry’s increase of 6.6%.



The Zacks Consensus Estimate for fourth-quarter earnings is currently pegged at $2.56 per share, decreasing 19.2% on a year-over-year basis. We expect the consensus mark to move south as analysts incorporate the cat loss impact.

When it comes to California wildfires, Mercury General Corporation (MCY - Free Report) recently issued pre-tax gross catastrophe loss estimate of $253 million, stemming from Camp Fire and Woolsey Fire.

With respect to losses originating from Hurricane Michael, Chubb expects the same to be in the upper end of the $150-$250 million pretax band as announced previously. Pertaining to the losses s from Hurricane Michael, insurer RLI Corp. (RLI - Free Report) anticipates cat loss between $22 million and $27 million, net of reinsurance. Also, AXIS Capital Holdings Limited (AXS - Free Report) fears preliminary cat loss between $100 million and $120 million, net of estimated recoveries from reinsurance and retrocessional covers and also including the impact of predicted reinstatement premiums for fourth-quarter 2018.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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