By Erik Holm
TAKING THE PULSE: The mild winter was kind to U.S. property-casualty insurers in the first quarter, giving the sector a respite after a long string of natural catastrophes that caused over $100 billion in insured losses worldwide last year.
Midwest tornadoes struck earlier than usual this year, but didn't exact too costly a toll. The Costa Concordia shipwreck will take a bite out of reinsurers' profits, but the roughly $1 billion in expected losses from that disaster pales in comparison to some of last year's events, including the earthquake and tsunami in Japan, flooding in Thailand and more severe tornadoes in the U.S.
Home and auto insurers have seen a rise in claims costs in recent months, and investors will be looking to see whether the trend is continuing and to determine which companies are reacting the fastest to the change. Among commercial insurers, interest will focus on the pricing environment, which has been showing signs of improvement of late.
As for the performance of insurers' vast investment portfolios, while property-casualty insurers generally hold more fixed-income securities than stock, they'll nonetheless benefit from the strongest first quarter for the Standard & Poor's 500 Index in more than a decade.
COMPANIES TO WATCH:
Travelers Cos. (TRV) - reports April 19
Wall Street Expectations: Analysts surveyed by Thomson Reuters expect an operating profit of $1.50 per share. For the same period a year earlier, operating profit was $1.89. Operating profit, the measure preferred by analysts, excludes some investment results.
Key Issues: As one of the largest insurers of businesses in the U.S., Travelers will have analysts' attention when it discusses the pricing environment for commercial insurance. The company is the first large insurer to report, and Wall Street will examine results for any read-across for others in the sector. In recent quarters, executives have been bullish on the rate increases they've been able to push through.
Allstate Corp. (>> The Allstate Corporation) - reports May 2
Wall Street Expectations: Analysts expect operating income of $1.07 per share. A year ago, Allstate earned 93 cents per share.
Key issues: Allstate has been raising prices for home insurance in several states and boosting the price of auto coverage in New York and Florida to counteract rising claims costs. Chief Executive Thomas Wilson has said results at both units must improve. The company is also working to reverse a years-long decline in the number of drivers who buy Allstate car-insurance policies--an effort slowed in recent quarters by the price increases in the two key states.
Hartford Financial Services Group Inc. (>> Hartford Financial Services) - reports May 2
Wall Street Expectations: Analysts expect core earnings of 91 cents per share, steered by the guidance the company gave in late March. Hartford had core earnings of $1.16 per share in last year's first quarter. Core earnings are Hartford's measure of operating results.
Key Issues: Hartford executives are sure to provide an update on the company's plan, announced last month, to halt annuity sales and sell off its life insurance business as it refocuses around its property-casualty operation. The company's largest shareholder, hedge fund Paulson & Co., isn't fully on board with the move. Hartford's May 3 conference call with investors may provide some fireworks; Paulson & Co.'s John Paulson wasn't shy about expressing his displeasure with Hartford management on Hartford's last earnings call in February.
American International Group Inc. (>> American International Group, Inc.) - reports May 3
Wall Street Expectations: Wall Street predicts an operating profit of 92 cents per share. AIG earned $1.30 per share in last year's first quarter.
Key Issues: AIG's two main insurance operations, a U.S. life insurer and a global property-casualty company, aren't getting too much attention from investors these days. Instead, attention has been focused on how quickly the company can sell off noncore assets like plane-lease unit International Lease Finance Corp. and rid itself of its largest shareholder, the U.S. government, which owns a 70% stake. Recent comments from AIG executives have led analysts to believe those moves could happen sooner than previously thought.
(The Thomson Reuters estimate and year-ago figures may not be comparable due to one-time items and other adjustments.)
-By Erik Holm, Dow Jones Newswires; 212-416-2892; email@example.com