Chubb to Face Up to $1.3 Billion in Losses From Harvey, Irma

Updated on
  • Harvey losses seen at $520 million, Irma’s up to $760 million
  • Analyst Havens says costs probably manageable for insurer

Assessing the Losses From Hurricane Harvey

Chubb Ltd. said losses from Hurricanes Harvey and Irma could total as much as $1.3 billion after taxes.

Harvey, which hit Texas in August and caused flooding in Houston, will cost the insurer about $520 million, the company said Wednesday in a statement. Claims expenses from Irma, the storm that slammed southern Florida earlier this month, could be $640 million to $760 million. Those figures dwarf the $107 million in after-tax catastrophe losses the insurer took during the third quarter of 2016.

Storms that have pounded Caribbean islands and the coastal U.S. this year are driving up costs for insurers. Allstate Corp. reported that it would face $385 million in after-tax costs from storms in August. Travelers Cos. said Sept. 11 that it would suspend share buybacks while it assessed damages from the storms. That insurer expects about $245 million to $490 million in after-tax costs from Harvey.

“For Chubb, these large losses should be manageable within the context of its earnings, capital position and ratings,” David Havens, an analyst at Imperial Capital, said Wednesday in a note. “But this is a big number.”

Chubb, based in Zurich, rose 30 cents to $141.91 in New York trading Wednesday, and has gained 7.4 percent this year. The shares were little changed in extended trading following the announcement.

‘High Side’

“It’s a little on the high side for storm losses,” Paul Newsome, an analyst at Sandler O’Neill & Partners, said by phone. “They’re real losses and affect the book value, but most investors will normalize for these large events because they are very episodic.”

The storms hit reinsurers and insurers on the other side of the Atlantic. Munich Re, the world’s largest reinsurer, said this month that Harvey and Irma will probably wipe out third-quarter profit and threaten its ability to meet the full-year earnings target. Spain’s Mapfre SA said that those storms, combined with Hurricane Maria, which devastated Puerto Rico, and earthquakes in Mexico could hurt earnings.

Chubb didn’t specify any costs tied to Hurricane Maria. That storm could cause up to $85 billion in insured losses for the industry, risk modeler AIR Worldwide said this week, a figure that some analysts said was surprising and seemed high.

“The catastrophes we have experienced in the last five weeks, including Hurricanes Harvey, Irma and Maria, and the earthquakes in Mexico, have been significant events, causing both a tragic loss of life and considerable property and infrastructure damage,” Chubb Chief Executive Officer Evan Greenberg said in the statement.

— With assistance by Sonali Basak

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