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Despite Sandy, Insurers Keep Improving During 2013

Stocks in this article: AIG ALL BRK-B TRV CB

Berkshire Hathaway's Class B shares closed at $117.03 Friday, rising 31% this year. The shares trade for 18.0 times the consensus 2014 EPS estimate of $6.51, among analysts polled by Thomson Reuters.

Allstate Corp.

Allstate Corp. (ALL) reported first-half underwriting income of $727 million, increasing from $657 million in the first half of 2012. The company's combined ratio for its property and liability insurance units declined to 94.7% in the first half of 2013 from 95.1% a year earlier.

The combined ratio is an insurer's claims and expenses divided by its earned premiums. A ratio below 100% indicates an underwriting profit.

Allstate's net income available to common shareholders during the first half of 2013 was $1.143 billion, or $2.39 a share, compared to $1.189 billion, or $2.39 a share, during the first half of 2012. The year-over-year profit decline reflected an increase in first-quarter losses.

Allstate's shares closed at $53.35 Friday, returning 35% this year. The shares trade for 10.3 times the consensus 2014 EPS estimate of $5.18.

The Travelers Companies

The Travelers Companies (TRV) for the first three quarters of 2013 reported an underwriting gain of $1.478 billion, increasing from $845 million during the first three quarters of 2012. The combined ratio improved to 90.6% during the first three quarters of 2013 from 94.3% a year earlier.

The company's net income increased to $2.685 billion, or $2.35 a share, during the first three quarters, from $2.169 billion, or $2.22 a share, during the first three quarters of 2012.

Shares of Travelers closed at $86.63 Friday, returning 23% this year. The shares trade for 10.8 times the consensus 2014 EPS estimate of $8.07.

American International Group

When we looked at the major P&C carriers right before Hurricane Sandy hit last year, American International Group (AIG) was lagging the group by continuing to post underwriting losses in its property and casualty insurance business. The company for the first half of 2013 reported a small P&C underwriting profit of $6 million, compared to an underwriting loss of $397 million during the first half of 2012. The combined ratio for the first half of 2012 was 100.0%, improving from 102.3% a year earlier.

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