KB&W said it is cutting estimates for a few insurance companies with northeastern exposure to wintry weather, while raising estimates for the reinsurer/catastrophe-exposed companies.

Equity research analysts at the firm said top-line pressures will likely continue and p&c insurer low- to mid-single-digit top-line declines are expected. KB&W said it expects insurers' investment income to rebound strongly versus the 2008 quarter and book values to be up 2 percent to 3 percent, on average.

In 2010, besides reduced premium volume KB&W predicts insurers' loss ratios worsening "as the result of a return to normal weather after a benign 2009 and less reserve releases versus 2009."

Expense ratios could rise, the company said, as volumes drop and "internal investments" are made. It expects lots of share buyback announcements that will prove disappointing, noting that such activity was premature in 2005 and 2008.

The report put out by Cliff Gallant, KB&W chief financial analyst, said, "While we are generally not enthusiastic about the sector, we see a few companies with solid track records and strong balance sheets that appear positioned to benefit from marketplace dislocation."

KB&W maintains Outperform ratings on Allied World, Assurance Holdings, Chubb Corp. and PartnerRe, and an Underperform rating on Zenith National Insurance.

For the fourth quarter, the analysis anticipates overall rate declines in the low-single-digit range for most casualty lines of business. However, the rate declines are decelerating, and many management teams expect rates to increase in 2010, said KB&W.

The analysis noted that claim frequency trends continue to be favorable and non-catastrophe-related claims should be flat to down slightly overall. "Average claims severity continues to trend in the mid- to upper-single-digit range, above overall inflation but within expectations for most p&c insurers."