Property & Casualty Insurer Earnings Could Take 26% Hit from Sandy: Morgan Stanley (ALL; CB; TRV)

From Barron's Stocks to Watch Today column:

Property & Casualty insurers could see earnings fall by an average of 26% after Hurricane Sandy, Morgan Stanley analyst Gregory Locraft wrote today.

Insured losses are expected to be at least $5 billion, with some estimates rising as high as $15 billion, Locraft notes, relying on data from multiple catastrophe modeling firms. These kinds of major events, however, tend to see losses rise over time.

Morgan Stanley is “[l]owering fourth quarter P&C carrier EPS an average 26% with primary players bearing the brunt of losses. Our 4Q EPS assumes $7-10b in Sandy losses (1.4-2x Hurricane Irene) and is allocated based on (1) Irene experience and (2) market share in affected states. We note there is little cushion left for future 4Q cat losses with 2 months remaining.”

Among the companies that could take a big earnings hit are ACE (ACE), AIG (AIG), Allstate (ALL), Chubb (CB), and Travelers (TRV). Of those, Locraft slashed his estimates for Chubb, Travelers, and AllState by more than 40% each....MORE