Shares of Chubb (CB), Allstate (ALL), and other specialist insurers fell after analysts raised their forecast for payouts from the Los Angeles wildfires, now expected to be the costliest in U.S. history.
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JPMorgan (JPM) analysts have doubled their estimate for insurance losses from the fires burning in the Pacific Palisades, Eaton, Hurst, and other LA neighborhoods to $20 billion. These fires have scorched some of the most expensive real estate in California.
“Expectations of economic losses stemming from the fires have more than doubled since yesterday to closer to $50 billion, and we estimate that insured losses from the event could exceed $20 billion (and even more if the fires are not controlled),” JPM wrote in a note to clients on Thursday, January 9.
Specialist insurers focused on high-value properties are the most exposed to losses, JPM noted, mentioning ALL, CB, and Travelers (TRV). The stocks were down about 3-4% in pre-market trading on Friday, January 10. Reinsurers such as Arch Capital (ACGL) and RenaissanceRe (RNR) are also exposed, said JPM.
CB Focuses on High Value Properties
As recently as Wednesday, JPM analyst Jimmy Bhullar stated that insurance industry losses from the Los Angeles fires would be “high but manageable,” estimating them at $10 billion. However, as the fires progress, more of the damage is concentrated in the affluent Pacific Palisades area. CB has a particular focus on high-value properties, and Bhullar believes it could exceed its share of losses compared to TRV or ALL.
At $20 billion in losses, the LA fires would significantly surpass the 2018 Butte County Camp Fires, which previously held the record for the highest insured wildfire losses in California’s history, at around $10 billion.
Ratings agency Moody’s also expects insured losses to reach billions of dollars, citing the high value of homes and businesses in the impacted areas.
Is Chubb a Good Stock to Buy Now?
Overall, Wall Street has a Moderate Buy consensus rating on CB stock, based on six Buys, five Holds and one Sell. The average CB price target of $306.64 implies 15% upside potential from current levels. Shares of CB have risen by 20% in the last year.
