Quarterly profits expected to decline as US prices squeezed

Bloomberg has predicted that Chubb, Travelers and Ace will report quarterly profit declines as consumers cut back on purchases and prices for coverage decrease.

“Rates are still declining in most commercial lines of business,” said Meyer Shields, an analyst at Stifel Nicolaus. “People are certainly buying less insurance than they had so we think in general, top-line will be under some significant pressure.”

Chubb may report earnings per share, which excludes some investment results, of $1.29, compared with $1.40 in the year-earlier period, according to the average estimate of analysts surveyed by Bloomberg.

Travelers, which reports on 30 July, is forecast to report $1.27 a share, down 23 cents from last year’s period and Zurich-based Ace, which reports 27 July, is expected to drop to $1.96 a share from $2.18, Bloomberg said.

Cheap pricing by government-funded AIG is blamed.

Reinsurers do better

Reinsurers, including Allied World Assurance and Everest Re may report next month increases in operating income, as rates paid to reinsurers have increased by 15%, making the reinsurance line an “area of strength,” Cliff Gallant, a KBW analyst, has said.

He forecast Allied will report second-quarter operating income of $1.98 earnings per share, up from $1.64 in the year-earlier period. His estimate for Everest’s operating income is $2.99 a share, compared with $2.91 from last year’s second quarter.