Reinsurers May Halt Stock Buybacks After Japan’s Quake, Deutsche Bank Says

Stock repurchases by most reinsurers may be halted because of last week’s earthquake and tsunami in Japan, and that may push down share prices this year, a Deutsche Bank AG analyst said.

Reinsurers in the U.S. and Bermuda are already facing almost a full year’s worth of losses in the first quarter, said Joshua Shanker, a New York-based analyst at Deutsche Bank AG, in a March 14 note. With a seasonal decline in share buybacks during the June-to-October North Atlantic hurricane season, losses from the Japanese disaster will cause a “near-term moratorium” on some repurchase programs.

Insurers and reinsurers have been returning capital to shareholders through dividends and stock repurchases as the prices businesses pay for coverage decline. Japan’s quake, which may have killed more than 10,000 people, could cost the global insurance industry as much as 2.8 trillion yen ($35 billion) in claims, according to AIR Worldwide.

“Meaningful share repurchase efforts have been supporting the share prices of a number of underwriters,” Shanker said. A halt to buybacks may “be a negative catalyst on future trading.”

Reinsurers help protect primary carriers against the cost of major claims from disasters like hurricanes and earthquakes. U.S. commercial insurance rates fell 5.4 percent in the last three months of 2010 and have dropped every quarter since 2004, according to the Council of Insurance Agents and Brokers.

Reinsurance Group of America Inc. (RGA) repurchased 2.5 million shares from Barclays Bank Plc for $149.4 million, according to a March 7 statement. Bermuda-based RenaissanceRe Holdings Ltd. (RNR) raised its quarterly dividend a penny a share to 26 cents and boosted its stock-repurchase program to $500 million, the company said in a Feb. 23 statement.

Reinsurance Group of America, based in Chesterfield, Missouri, declined 93 cents, or 1.6 percent, to $59.16 in regular trading yesterday on the New York Stock Exchange. Bermuda-based RenaissanceRe advanced 20 cents to $65.60.

To contact the reporter on this story: April Lee in New York at alee355@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.