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 U.S. East Coast in decades. Buckingham Research Group analyst Amit Kumar[WD] 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
Of all the U.S. insurance stocks with exposure to the Georgia, North Carolina, South Carolina and Virginia coastal property markets, Kumar says Allstate Corp. (ALL) has the most market share. He estimates Allstate has roughly 7.4 percent market share among insurers and had roughly $2.049 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.
2. Berkshire Hathaway
After Allstate, Kumar says Berkshire Hathaway, Inc. (BRK.A, BRK.B) has the most property exposure in the southern Atlantic Coast region. Berkshire and its subsidiaries have about 5.5 percent market share in the area, which represented more than $1.503 billion in Berkshire 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 estimate of $3,840.69 is at risk.
3. Travelers
Travelers Companies, Inc. (TRV) has 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 $1.233 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 five days, suggesting investors are appreciating the risk.
4. Progressive
Progressive Corp. (PGS) has about 3.8 percent market share in the region, which represented more than $1.050 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.
5. Erie Insurance
Kumar estimates…
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