然而，投资者拥有的保险公司如好事达(ALL.N)、安达保险(CB.N)、旅行者财产险集团(TRV.N)和默邱利通用(MCY.N)可能会面临较大的损失风险。The losses caused by the wildfires in Los Angeles may set a historical record, but the insurance giant Berkshire Hathaway can 'escape unscathed'.
Berkshire Hathaway A (BRK.A.N) is not a major home insurer in California. In California, Berkshire is a larger auto insurer through its Geico unit, but auto insurance is not expected to suffer significant losses from fires.
As the largest property and casualty insurer in the U.S., Berkshire Hathaway is unlikely to suffer significant losses from wildfires in the Los Angeles area, as it is not a major home insurer in California.
However, insurance companies owned by investors, such as Allstate (ALL.N), Chubb Ltd (CB.N), The Travelers Companies (TRV.N), and Mercury General (MCY.N), may face higher risk of significant losses.
JPMorgan Analyst Jimmy Bhullar stated Thursday that insurance losses from the Los Angeles wildfires could exceed $20 billion, which would become the largest wildfire insurance loss in California's history, surpassing the $10 billion record set by the Camp fire in Butte County in 2018. The total economic losses from the Los Angeles wildfires could reach $50 billion.
Bhullar expects that the insurance losses from this event will mainly impact homeowners insurance with Allstate, The Travelers Companies, and Chubb Ltd being significantly affected among publicly listed insurers, followed by business property insurers The Travelers Companies, American International Group (AIG.N), Chubb Ltd, and Kinsale Capital (KNSL.N).
Overall, we believe this event poses an incremental negative factor for personal lines underwriters and reinsurers, but is not sufficient to change our stock recommendations.” He also added that while high losses contribute to rising insurance rates (and reinsurance rates) in California in the future, the recent losses are a greater negative factor for most affected insurance companies.
Bhullar has assigned an "increase" rating to Allstate and AIG, a "neutral" rating to Chubb Ltd and Kinsale Capital, and a "reduce" rating to The Travelers Companies.
Progressive Insurance (PGR.N) is the second-largest auto insurer in the US, only behind State Farm, and has very little exposure in California homeowners insurance, potentially benefiting from "stronger pricing discipline" among mutual insurance companies. Bhullar noted that mutual insurance companies may absorb most of the wildfire losses in Los Angeles, which are Progressive's main competitors in the personal auto insurance market.
Mercury General's Business is mainly focused in California, which accounted for nearly 80% of its $4.6 billion premium income last year. Among publicly listed property and casualty insurance companies, Mercury General may face the greatest risk relative to its size.
In the first nine months of 2024, Mercury's homeowners insurance premiums in California exceeded $0.7 billion, while auto insurance premiums were $2.3 billion. On Wednesday, Mercury's stock price fell 6.5%, closing at $60.70.
Mercury performed the worst among its peers, while investors are not concerned about the financial impact on most large property and casualty insurers. Chubb Ltd's stock price fell 0.8% on Wednesday, while Allstate rose 3% to $191.80, and The Travelers Companies rose 0.5% to $242.77. Berkshire Class A shares were virtually unchanged, closing at $677,925.
In 2023, the four largest homeowners insurance companies in California are State Farm (19.9% market share), Farmer's Insurance (14.9%), CSAA Insurance Exchange, and Liberty Mutual, according to data from S&P Financial and JPMorgan. All four companies are privately held, with State Farm and Liberty being mutual companies.
Over the past year, State Farm has reduced homeowners insurance policies in areas affected by the Los Angeles wildfires, thereby lowering its fire risk.
Mercury General ranks fifth in the California homeowners insurance market, with Allstate sixth, The Travelers Companies ninth, and Chubb Ltd eleventh. Berkshire did not make the top twenty.
Through Geico, Berkshire is a larger auto insurer in California, but auto insurance is not expected to suffer significant losses due to the wildfires.
Berkshire Hathaway also has a large reinsurance business. CEO Warren Buffett stated that Berkshire can absorb about 3% of significant disaster losses such as hurricanes, earthquakes, or fires.
If this ratio applies to the incident — even considering the huge exposures of primary insurance companies, this figure may be on the high side — Berkshire's losses could reach approximately 0.6 billion dollars, which is a small fraction of the company's 300 billion dollars in insurance capital. Such a loss also pales in comparison to Berkshire's post-tax operating profit, which exceeds 10 billion dollars per quarter.
If losses lead to an increase in disaster and other property and casualty insurance premiums, insurance companies, including Berkshire, may benefit from this. This situation sometimes occurs after significant events.
