Florence is a threat to insurance stocks.
All eyes are on the southern Atlantic Ocean this week, where Hurricane Florence threatens to be one of the strongest storms to make landfall on the east coast in decades. Buckingham Research Group analyst Amit Kumar has estimated the per-share risk for insurance stocks with major exposure to the east coast property market, and the results aren’t pretty. Kumar used a $10 billion insured loss estimate as a gauge for catastrophe-exposed insurance segments and calculated potential gross losses prior to reinsurance recoveries. Here’s a look at eight insurance stocks that could take a hard hit from Florence.
Allstate Corp. (ticker: ALL)
Of all the U.S. insurance stocks with exposure to the Georgia, North Carolina, South Carolina and Virginia coastal property markets, Kumar says Allstate has the most market share. He estimates Allstate has roughly 7.4 percent market share among insurers and had roughly $2.05 billion in premiums in the region as of 2017. The impacted region represents about 0.3 percent of Allstate’s nationwide premiums. Kumar estimates Allstate could have $1.66 in earnings per share at risk from Florence, roughly 81 percent of the company’s estimated third-quarter EPS of $2.04.
Berkshire Hathaway (BRK.A, BRK.B)
After Allstate, Kumar says Berkshire Hathaway has the most property exposure in the southern Atlantic coast. Berkshire and its subsidiaries have about 5.5 percent market share in the area, which represented more than $1.5 billion in Berkshire Hathaway premiums as of last year. The affected area represents about 0.2 percent of Berkshire’s nationwide premiums, and Kumar estimates that Berkshire has $261.72 in Class A-share EPS at stake. Fortunately for investors, Berkshire’s diversification means only about 6.8 percent of its estimated third-quarter EPS of $3,840.69 is at risk.
Travelers Companies (TRV)
Travelers has a slightly lower 4.5 percent market share of the region at-risk from Florence, but its potential losses represent a much higher percentage of its estimated quarterly earnings. The impacted region represented about $1.23 billion in Travelers premiums in 2017, or about 0.2 percent of its nationwide total. Kumar estimates Travelers has about $1.30 in EPS on the line, which is 56.7 percent of its estimated third-quarter EPS of $2.30. TRV stock is down 3.6 percent in the past week, suggesting investors are appreciating the risk.
Progressive Corp. (PGR)
Progressive has about 3.8 percent market share in the region, which represented more than $1.05 billion in Progressive premiums as of last year. The affected area represents about 0.2 percent of Progressive’s nationwide premiums, and Kumar estimates Progressive has 51 cents in EPS at stake, or 49.7 percent of its third-quarter EPS of $1.03. Despite roughly half of its earnings at risk, PGS stock is down just 0.7 percent in the past five days. Investors seem to be counting on solid reinsurance coverage and/or a best-case Florence scenario.
Erie Indemnity Co. (ERIE)
Kumar estimates Erie has roughly 2.3 percent market share among regional insurers and had roughly $620 million in premiums in the area as of 2017. The impacted region represents about 0.1 percent of Erie’s nationwide premiums. Erie is particularly exposed to the commercial market in the four states, where it holds roughly a 5.5 percent market share representing 0.2 percent of its nationwide commercial premiums. Kumar estimates Erie could have $3.37 in earnings per share at risk from Florence, a whopping 257 percent of the company’s consensus third-quarter EPS estimate.
Chubb (CB)
Chubb has about 1.9 percent market share in the region, which represented more than $534 million in Chubb premiums as of last year. The affected area represents about 0.1 percent of Chubb’s nationwide premiums, and Kumar estimates that Chubb has 33 cents of EPS at stake. Fortunately for investors, that risk represents only about 12.3 percent of its estimated third-quarter EPS of $2.66. The stock’s 1.3 percent decline in the past week implies investors are keeping an eye on Florence’s progress but banking on Chubb to weather the storm.
National General Holdings Corp. (NGHC)
Price action in National General suggests investors are taking Florence seriously. The stock is down 6.5 percent in the past week for good reason. National General has only a 1.4 percent regional market share at-risk from Florence. The impacted region represented about $394 million in National General premiums in 2017, or about 0.1 percent of its nationwide total. However, the reason for the sell-off is likely because Kumar estimates National General has about $1.03 in EPS on the line, which is 197.1 percent of its estimated third-quarter EPS of 52 cents.
CNA Financial Corp. (CNA)
CNA Financial has about 1.4 percent market share in the region, which represented more than $371 million in CNA premiums as of last year. The affected area accounts for about 0.1 percent of CNA’s nationwide premiums, and Kumar estimates CNA has 39 cents in EPS at stake, or 38.6 percent of its projected third-quarter EPS of $1.03. Despite the earnings risk, CNA stock is essentially flat over the past week. Investors seem to have confidence in CNA’s reinsurance situation based on the stock’s price action.
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8 Insurance Stocks Most Exposed to Hurricane Florence originally appeared on usnews.com
