3 Insurance Stocks That Got Hit By Sandy

Hurricane Sandy was downgraded by the National Weather Service to a tropical storm before it hit the east coast of the U.S. 7 days ago (October 29, 2012). Regardless, the storm played havoc and caused widespread damage which left 40,000 New Yorkers temporarily homeless and 110 dead. One obvious benefit of the downgrade for the homeowners hit by the storm is fewer insurance deductibles. In other words, lack of insurance deductibles means insurers would have to pay more. According to new estimates by a forecasting firm Eqecat, the Sandy storm could be the second most expensive storm in the U.S. history, after Hurricane Katrina. Sandy is estimated to have caused damages between $30 billion and $50 billion, while insurance cost to insurers is expected to be between $10 billion and $20 billion. That is why an analyst of Morgan Stanley wrote, while addressing investors in a report, that the U.S. property-casualty sector could see its bottom line drop by 26%. However, we believe that the effect would not be permanent. Insurance stocks have seen the initial dip and a further sell off will provide an ideal entry point for investors.

In conclusion, we believe the insurance companies under consideration have sufficient capital to sustain the losses from the storm. We also believe that the effects of the Sandy storm have already been priced in, to some extent, for Allstate and Travelers. Read full article.