LOS ANGELES (AP) — Shares in insurance and reinsurance companies were trading mostly lower on Tuesday, as investors absorbed the potential financial consequences on the sector from the deadly earthquake in Japan.
Expenses are expected to mount due to continuing aftershocks from the massive March 11 earthquake off the coast of northeastern Japan and shutdowns at electronics factories, car manufacturers and oil refineries. More than 10,000 people are believed to have been killed in the 9.0-magnitude quake and the ensuing tsunami.
Last week, catastrophe risk modeling firm AIR Worldwide estimated that insured property losses from the earthquake could range from $15 billion to $35 billion.
In a research note on Tuesday, Janney Capital Markets analyst Larry Greenberg said the earthquake is a “market-changing event” for the catastrophe reinsurance market.
In addition, he said it's likely that the insured losses from the quake will be on the high end of AIR's estimate.
That's potentially good news for some reinsurers, which cover risk for insurance companies.
The analyst upgraded Aon Corp. and Willis Group Holdings Public Ltd. Co., to a “Buy” from “Neutral,” saying the companies have reinsurance brokerage platforms and should benefit from higher prices and potentially higher demand.
Greenberg also downgraded Arthur J. Gallagher & Co. to “Neutral” from “Buy,” noting the company doesn't have a reinsurance brokerage presence.
Aflac Inc., which does 75 percent of its business in Japan, saw the sharpest drop among the sector stocks trading lower on Tuesday.
The insurer's shares fell 6.6 percent, or $3.57, to $50.33 in afternoon trading.
Shares in MetLife Inc. slid 3.9 percent, or $1.75, to $42.99, while Prudential Financial Inc. shares fell 2.1 percent, or $1.27, to $59.99.
Willis Group Holdings' shares slipped 11 cents to $39.10, while shares in Arthur J. Gallagher dropped 16 cents to $30.69.
Brown & Brown Inc. saw shares dip 13 cents to $25.20, while shares in Marsh & McLennan Cos. Inc. fell 1 cent to $30.22.
Aon bucked the trend, adding 62 cents to $52.57.
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