The stock of Allstate Corp. (ALL) and other publicly-traded insurers are down sharply as some damage estimates from the wildfires in Los Angeles, California surpass $150 billion.
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ALL stock is down 6% as the Los Angeles wildfires continue to rage, engulfing homes and businesses across the city. Other insurance stocks are also being pressured, with Travelers Companies (TRV) down 4% and Chubb (CB) down 3%.
The decline in the stocks of home insurers comes after California’s insurance commissioner issued a one-year moratorium on insurance non-renewals and cancellations in the state. Analysts have been speculating that insurers will be looking to pullout of California as the risk of wildfires from dry weather intensifies. Shares of Mercury General (MCY), whose business is concentrated in California, fell 21%.
Massive Costs
The California wildfires have now killed 10 people and burned more than 35,000 acres of land, according to California’s forestry department. In a research note, four-star rated analyst Jimmy Bhullar at JPMorgan Chase (JPM) estimates that insured losses from the California fires could top $20 billion. He added that the losses would be “confined mostly” to homeowners insurers such as Allstate, Travelers, and Chubb.
However, Bhuller also noted that commercial property insurers such as American International Group (AIG) are exposed to huge costs from the fires. AIG stock is down 2% on the day. JPMorgan also doubled its estimate for the total economic losses in Los Angeles to $50 billion.
However, private forecaster AccuWeather estimates the total economic loss from the fires at $150 billion, equal to nearly 5% of California’s Gross Domestic Product (GDP). ALL stock has risen 22% over the last 12 months.
Is ALL Stock a Buy?
The stock of Allstate has a consensus Strong Buy rating among 14 Wall Street analysts. That rating is based on 12 Buy, one Hold, and one Sell recommendations assigned in the last three months. The average ALL price target of $228.07 implies 26.71% upside from current levels.
