Rising property insurance costs are playing an increasingly important role in quarterly financial reports, according to an investment bank analysis.
Morgan Stanley analyst William Wilt said a sampling of data from second-quarter company conference calls indicates greater catastrophe insurance costs are hurting policyholders more and more.
“Realistically, insurance expenses may not be a major source of earnings disruption, but companies near the edge of consensus expectations may start to add rising insurance costs or weather-induced earnings volatility to their list of 'one-time' expense items in upcoming quarters,” he wrote.
Insureds that have retained more risk through less coverage or increased deductibles face a greater threat of earnings volatility in the coming quarters, Mr. Wilt wrote.
The following are samples from some second-quarter conference calls:
o AMB Property Corp. said expenses rose 3.7 percent due primarily to a rise of up to 40 percent in property-casualty insurance rates.
o Starwood Hotels reported that, at the hotels it owns outright, property premiums are up 100 percent on a year-over-year basis.
o Hilton Hotels Chief Financial Officer Robert LaForgia said that increased property costs will account for about 30 basis points in profit margin.
o Wal-Mart reported that it is now 100 percent self-insured for any losses from named windstorms since the insurance it was offered was substantially more limited and higher priced than in previous years.
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