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) -- Despite the hysterical media coverage of Hurricane Isaac, share prices for major property insurers have held up quite well over the past two weeks.

Shares of

The Allstate Corp.


closed at $37.33 Wednesday, down 1% from two weeks earlier, while

The Travelers Companies


saw its stock rise 2% over the same period, to close at $64.80 on Wednesday.

The reason that Isaac has had no effect on the insurers' share prices is that the damage estimates so far from hurricane top out at $1.5 billion. When you compare that with a hail storm that hit Dallas in June caused just as much property damage, this hurricane will not move the insurance share needle.

In fact, the nation's largest publicly traded property and casualty insurers are still reeling from a major bet on building their businesses in the Midwest, while shying away from coastal areas, lessening the impact of hurricanes on their balace sheets and doubling down on the impact of losses from tornados, hail storms and severe thunderstorms.

As the insurers began to reduce their underwriting in coastal areas in the wake of Hurricanes Frances and Jeanne in 2004 -- and especially the catastrophic Hurricane Katrina in 2005 -- they began focusing on building their property insurance underwriting in the Midwest.

At the same time insurers faced an accelerating trend for severe storms in the region. According to a study released by the Rocky Mountain Climate Organization in May, using 50 years of data from 218 U.S. Climatology Network in Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio, and Wisconsin, the frequency of storms dropping between two to three inches of rain a day increased 30% from 2001 through 2010, with storms dropping three inches or more of rain in a day increasing 51%.

Tornadoes in the Midwest have also become more frequent. According to the National Climatic Data Center, in the spring and summer of 2011, "there were seven individual tornado and severe weather outbreaks with damages exceeding one billion U.S. dollars, and total damage from the outbreaks exceeding 28 billion U.S. dollars," and that the confirmed 1,625 tornadoes in 2011 (with 93 still pending) was "the second or third most active year on record for number of tornadoes since the modern record began in 1950."

Wild fires have also been a major concern in some parts of the country.

According to Insurance Information Institute president and economist Robert Hartwig, "last year there were nationally about $33 billion in insured catastrophe losses in the united states, for the fifth most expensive year in history. Unlike 2004 and 2005, when hurricanes were the dominant events, the reality is the industry has seen record or near-record thunder storm losses every year since 2008.

For insurance purposes, a thunder storm "includes everything may happen in a thunderstorm, including tornadoes, hail, lightening and straightline winds" according to Hartwig.

Hartwig says the property insurance industry has faced "a prolonged period of large-scare catastrophe losses, mostly away from the coast, which has created very substantial claim activity in parts of the country that have not usually seen losses of this magnitude," and that "over time, we see these losses trending upward.

"There have been enough weather events causing problems over the past few years, so a Hurricane is just another event," according to Weiss Ratings senior financial analyst Gavin Magor, who says that for the major property insurers, "the problem is when you keep having them and you're not reserving sufficiently and being extra competitive with your rates, underpricing to gain market share, you will suffer large unexpected losses."

"P&C insurers under a tremendous amount of pressure, and this is the one area in the insurance business where we have seen failures this year," according to Magor, who says that "11 property insurers have failed so far during 2012."

According to Hartwig, "insurers are looking at these apparently sustained trends, which have become a driver for higher insurance rates for homes and for commercial structures." The higher rates "really started last year," he says. "commercial property insurance rates as of the middle of 2012 were up 7 to 7.5% nationally, and that trend is continuing as we move through the second half of 2012.

Here's how the numbers stack up for two of the largest publicly traded U.S. property insurers:


Shares of Allstate closed at $37.33 Wednesday, returning 39% year-to-date, following an 11% decline during 2011.

The shares trade 0.9 times their reported June 30 book value of $39.73, and for 8.5 times the consensus 2013 earnings estimate of $4.40, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $4.14.

Based on a quarterly payout of 22 cents, the shares have a dividend yield of 2.36%.

For 2011, Allstate reported net income of $788 million, or $1.51 a share, declining from $928 million, or $1.72 a share, during 2010. Total property-liability insurance premiums were $25.9 billion in 2011, matching the previous year's results, while claims and claims expenses totaled $20.2 billion, increasing from $19.0 billion in 2010.

The company's combined ratio for its property-liability insurance business during 2011 was 103.4, increasing from 98.1. A combined ratio over 100 means that you are paying out more than the premiums you are taking in.

Allstate has fared better so far during 2012, with combined ratio of 95.1. The company earned $1.2 billion during the first half of 2012, or $2.40 a share compared with a net loss of $100 million, or 19 cents a share, during the first half of 2011. The company estimates that its catastrophe losses for the first half of 2012 total $820 million.

Credit Suisse analyst Michael Zaremski rates Allstate "Outperform," with a $41 price target, saying on August 5 that the second-quarter results showed "faster than expected underlying margin improvement in all major segments, partially offset by a lower investment income forecast given the continued drop in yields."

Zaremski estimates that Allstate will earn $4.10 a share for all of 2012, followed by 2013 EPS of $4.28. The analyst also estimates that Allstate's book value will rise to $41.20 at the end of 2012.

"We continue to believe shares will appreciate to levels just north of current book value as investors appreciate management's margin improvement initiatives within the homeowners' segment; which in a few years' time, should meaningfully cut off ALL's 'tail' in regards to the potential for outsized losses," he said.

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Shares of The Travelers Companies closed at $64.80 Wednesday, returning 11% year-to-date, following a 9% return during 2010.

The shares trade for 1.1 times their reported June 30 adjusted book value of $57.18, and for 10 times the consensus 2013 EPS estimate of $6.40. The consensus 2012 EPS estimate is $6.26.

Travelers reported 2011 earnings of $1.4 billion, or $3.40 a share, declining from $3.2 billion, or $6.62 a share. Net premiums written increased to $22.2 billion in 2011, from $21.6 billion the previous year, but like Allstate, Travelers paid out more in claims than it earned in premiums. The 2011 combined ratio was 105.1.

During the first half of 2012, the company's combined ratio was 96.3%, and the company reported net income of $1.3 billion, or $3.27 a share, increasing from $475 million, or $1.04 a share, during the first half of 2011.

Wels Fargo analyst John Hall rates Travelers "Outperform," with a valuation range of $67 to $72, saying on August 9 after hosting meetings with the company's management that Travelers "is in the midst of a period of rate firming, which has the potential to lead to improving margins and better than projected book value growth."

Hall said that "for the time being, the market seems to be following suit in seeking rate in

increases for commercial lines," and that "While this continues, we think Travelers' intention to continue the process of taking rate has legs."

The analyst estimates that Travelers will earn $6.23 a share for all of 2012, followed by EPS of $5.95 in 2013.

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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.