Non-life insurance firms, including several with operations in Hartford, could see improvement in fourth-quarter results because of lower interest rates, expectations for low catastrophic losses and improving reinsurance pricing, an analyst said today.
But, non-life insurers are likely to see a decline in premium volume during the quarter as well, JPMorgan Chase & Co. analyst Matthew Heimermann wrote in a research note.
The Travelers Co. and XL Capital Ltd., both with operations in Hartford, are among the group. Others include Allstate Insurance Co., Ace Ltd. and Everest Re Group Ltd.
Heimermann said lower interest rates and operating gains should help offset mixed credit spreads and losses from declining equity markets. He estimates insurers will see their book values increase by an average of 4.6 percent when reporting fourth-quarter results.
Non-life insurers could also see fourth-quarter results bolstered by low levels of catastrophic losses, Heimermann wrote in the note. Given a lack of major catastrophic storms during the final three months of the year, costs are unlikely to match budget estimates, boosting earnings. Insurers might have to add to loss provisions already taken from storms such as Hurricanes Ike and Gustav that hit during the previous quarter, which could eat into catastrophic loss estimates, Heimermann said.
Despite an expectation that catastrophic losses will be muted in the fourth quarter, Heimermann did not adjust his estimates to reflect the trend, only noting that it could help to boost estimates.
Pricing among certain portions of the reinsurance segment are also improving, which could help that segment of the industry, Heimermann wrote in the note. But, primary pricing is still weak, he noted.
Overall for the fourth quarter, Heimermann expects premium volume likely to fall across all types of insurance — personal lines, commercial lines and reinsurance. He predicts personal line premium volume will fall the least at just 0.6 percent. (AP)
