According to a recent estimate by Goldman Sachs, losses to insurance companies resulting from the Los Angeles wildfires could be as high as $30 billion. Consequently, many insurance stocks, particularly property and casualty insurance companies, have been trading down or sideways since the fires started. Utility companies in the area are also struggling to figure out the extent of the damages as well as their future prospects in the region.
Even today, a large portion of the fire remains uncontrolled, left at the mercy of the strong LA winds to determine the direction in which it will spread. Insurance companies will not only have to settle claims quickly but are also uncertain how much more the fires will spread. We looked at the companies that are negatively impacted by these events and whose stock is feeling the heat from the fires.
To come up with the 5 stocks that are negatively impacted by the LA wildfires, we only considered companies with a market cap of at least $10 billion.
5. The Travelers Companies, Inc. (NYSE:TRV)
The Travelers Companies Inc. not only deals with personal and commercial properties but also offers casualty insurance services in the US and internationally. In the insurance segment, it operates in personal insurance, business insurance, and bond and specialty insurance. The stock’s price has consistently rewarded investors along with a reliable dividend history. Even though the company’s evaluation is attractive, the ongoing crisis of the Los Angeles wildfire is a cause of concern for investors.
If Travelers incurs a loss worth $30 billion, it would lose about 3.8% of its total value. It is just an estimate but losses can cross this estimate if the fire keeps spreading. Shares in Los Angeles-based Travelers have recovered most of their losses in the last 5 days, though the stock is still down over 4% in the last month. Property and casualty stocks keep declining as they are in the spotlight due to LA’s wildfire.
According to J.P. Morgan, insurance losses from the ongoing wildfires are estimated to be at least $20 billion. It suggests that TRV is among the companies that are most exposed to the losses caused by ongoing wildfires. The company’s financial health and strong performance are good indicators but the situation right now is not in its favor. It might be a risky option at the moment but it is still a valuable option for the long term.
4. Chubb Limited (NYSE:CB)
Chubb Limited provides insurance and reinsurance products globally. It’s a top publicly traded commercial property insurer with a strong performance in the past year. Due to the ongoing crisis of wildfires in Los Angeles, the stock went through a decline. Share prices have improved in the last 4 days and are recovering losses.
The company’s expected EPS growth for 2025 & 2026 is 7.37% and 6.77% respectively. Keeping in mind the current crisis and its effects on the company, estimates might vary. Wells Fargo projected that the Los Angeles wildfire could cause damage worth $30 billion to the insurance sector.
According to a team directed by analyst Elyse Greenspan, 12,000 structures each valued at around $3 million have been demolished. Being an insurance and reinsurance provider, CB will bear losses resulting from the ongoing crisis. Despite all the negativity, the stock has performed well in the last two days, soothing investor nerves.
3. Arch Capital Group Ltd.(NASDAQ:ACGL)
Arch Capital Group Ltd., is an insurance, mortgage insurance, and reinsurance provider operating worldwide. It is a specialty insurance and reinsurance company with a current market value of $35 billion. Recently ACGL’s stock price dropped due to the ongoing Los Angeles wildfires.
Analyst Jimmy Bhular stated in a note that most insured losses will be borne by homeowners’ coverage and fewer will be borne by commercial. Since the company engages mainly in the commercial sector, it might be a manageable loss for the company. The stock has ended green on both trading days this week.
Keeping in mind the company’s strong growth history in the industry, the recent price decline can be taken as an opportunity to start building a position in the stock for post-crisis gains. `
2. RenaissanceRe Holdings Ltd. (NYSE:RNR)
RenaissanceRe Holdings provides insurance and reinsurance services across the globe. Its stock enjoyed considerable gains in 2024, which were set to continue were it not for the LA wildfires. The stock is trading flat so far this year as everyone tries to assess the extent of the damage.
Despite a strong price action until December 2024, all was not well with the company. Analysts are pessimistic about the company’s growth prospects, with Jeffries downgrading the stock from Buy to Hold last month. The target price was subsequently cut from $304 to $282. The 2025 and 2026 EPS estimates were also lowered, though they are still higher than the industry-wide consensus estimates.
The management is also buying back the company’s stock despite its decent run in 2024. The ongoing crisis in LA and the resulting share price drop could be an opportunity for the company to accelerate this buyback.
1. Edison International (NYSE:EIX)
Edison International is an electric power generator and distributor company operating in South California. It supplies electricity to the public authorities, residential, commercial, agricultural, industrial, and other sectors. Being one of the major suppliers of electricity to Southern California, the Los Angeles wildfire harmed Edison International’s business. Current estimates show that the massive fire in Los Angeles caused damages worth $150 billion. The company will lose revenue as it is no longer supplying electricity to destructive areas.
The company is facing legal repercussions of the ongoing crisis, with the first lawsuit claiming that its equipment sparked the massive wildfires in the Los Angeles area. The lawsuit on behalf of the renters, homeowners, and business owners claims that a power line pole initiated the massive fire that destroyed the community of Altadena. According to the lawsuit, the company was unable to manage its electrical equipment properly, which caused damage to private property.
Since the fire started, Edison International shares have declined by 27%. The stock price has now returned to October 2023 levels. Even though it possesses a weak balance sheet, the stock valuation is still attractive. So it might be a good option for those willing to take a risk. Otherwise, things are not going in favor of Edison right now.
Edison International is not on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held EIX at the end of the third quarter which was 32 in the previous quarter. While we acknowledge the potential of EIX as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as EIX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
