While commercial-insurance rates are on the rise, other factors could negatively affect fourth-quarter earnings for specialty and Bermuda insurers, according to a recent Stifel Nicolaus report.
A combination of dwindling reserves, loss-cost inflation and Superstorm Sandy losses will put pressure on underwriting margins, says Stifel Nicolaus, adding that low interest rates from fixed-income investments will exert further strain.
Fourth-quarter earnings per share are expected to be negative for most companies the firm covers, with the exception of RLI, W.R. Berkley and Ace.
On publicly held insurance brokers and primary-insurance carriers Stifel Nicolaus is slightly more upbeat, stating that premium increases should help their Q4 numbers.
Investors view Personal and Commercial Lines carriers favorably despite losses from Sandy, as pricing trends are improving, the firm says.
Insurance brokers are expected to see the most benefit from rate increases and an improving economy. All five publicly held brokers Stifel covers are expected to report positive Q4 results.
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