Insurers tally hurricane profit impact

Insurers are expected to take a $15 billion to $20 billion hit from the four hurricanes that have hit Florida in the last month and their third-quarter profits will show it, dropping an estimated 40 to 60 percent, experts say.

The industry’s preliminary calculations show this year’s losses will be the largest that have been hurricane-related in more than a decade.

“It’s going to be a significant adverse effect on the third quarter and full year earnings,” said David Anthony, senior insurance analyst with Argus Research in New York. “All the big companies will be significantly affected.”

Insurers could see third-quarter profits drop 40 to 60 percent, Anthony said. Some companies could see their quarterly earnings wiped out, said Jeff Thompson, vice president of Keefe, Bruyette and Woods in Hartford.

Insurance prices also may be increased moderately, Thompson said. It also may lead to questions about the level of exposure some companies have in Florida, he said.

But the hurricanes are not expected to have the same impact on the industry as Hurricane Andrew in 1992, when about a dozen companies went out of business. That storm led to a series of reforms, including more deductibles, better risk assessments, strong reserves and a hurricane fund in Florida, that have spread out the risk of losses, experts say.

“Combined, there is a lot of money involved, but it’s not something we haven’t anticipated for,” said Loretta Worters, vice president of the Insurance Information Institute. “We’re very confident we’re able to pay the claims without any difficulty.”

The St. Paul Travelers Companies Inc. estimated losses of more than $200 million from Hurricanes Charley and Frances alone. That will cut earnings by 31 cents per share in the third quarter, the company said.

The Hartford Financial Services Group has estimated its losses at $140 million for Hurricane Charley, but would not provide estimates for the latest storms.

W.R. Berkley Corp. in Greenwich estimated up to $15 million in losses for three of the hurricanes. General Electric Co. in Fairfield was analyzing its losses.

“We certainly will have losses,” said Dean Davison, spokesman for GE Insurance Solutions. “These are big events and we’re trying to get as accurate a calculation as we can.”

The losses could have been even more severe if one of the hurricanes hit a densely populated area such as Miami, Worters said. But the industry, like Floridians, was weary of reports of more hurricanes.

“There’s still some storms out there,” Worters said.