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Arch Capital's Sandy Cat Loss Est.

XL AXS ACGL

Trades from $3

Arch Capital Group Limited (ACGL - Free Report) expects to incur pre tax loss in the range of $170–$240 million, net of reinsurance and the effects of reinstatement premiums, due to Superstorm Sandy. The estimate is based on the forecasted industry insured losses of $20–$25 billion.

Reinsurance segment will bear 60% of the loss, while the remaining 40% will be borne by the Insurance segment.

Arch Capital Group posted better numbers in each of the first three quarters of 2012 owing to lower catastrophe activities. Underwriting results and combined ratio exhibited huge improvement. The first two quarters reported underwriting profit, which rebounded from the year-ago loss, while the third quarter exhibited significant improvement. Conversely, the scenario in the fourth quarter of 2012 is expected to be disrupted owing to the huge losses from Superstorm Sandy.

The Zacks Consensus Estimate for the fourth quarter of 2012 is 7 cents representing a year-over-year decline of 92.5%. However, for full year 2012, it is currently pegged at $2.82 reflecting year-over-year growth of 27.8%. We expect the year-to-date performance to dwarf the headwinds in the fourth quarter and aid Arch Capital to come up with better numbers.

Among other insurers Axis Capital Holdings Limited (AXS - Free Report) and XL Group Plc (XL - Free Report) , which closely compete with Arch Capital, have also provided their loss estimates from Hurricane Sandy for the fourth quarter of 2012. Axis Capital anticipates its pretax loss to be $300 million, net of tax and estimated recoveries from reinsurance and including estimated reinstatement premiums whereas XL Group expects pretax loss of approximately $350 million, net of reinsurance and reinstatement premiums.

Arch Capital currently holds a Zacks #3 Rank, which translates into a short-term hold rating. Axis Capital and XL Group also share the same Zacks Rank.
 


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