AJG - P&C insurance reinsurance stocks hold up after Hurricane Ian pummels Florida

With Hurricane Ian pushing its way up from Florida, leaving millions without power and causing massive flooding and property damage, property and casualty (P&C) insurer, reinsurance, and insurance brokerage stocks are surprisingly calm. Some reinsurance stocks are even rising as the event is expected to give them more pricing power.

The S&P 500 Property & Casualty insurance Index (SP500-40301040) is down 0.2% in Thursday morning trading, less than XLF's 0.9% slip. In specific stocks, reinsurers Everest Re ( NYSE: RE ) is up 2.0% , RenaissanceRe Holdings ( NYSE: RNR ) +2.7% , and Arch Capital Group ( NASDAQ: ACGL ) +2.2% .

Most estimates for the storm's insured losses are in the $20B-$30B range. Jefferies analyst Yaron Kinar expects reinsurers to be more exposed to losses than primary P&C insurers.

Everest Re Group ( RE ) and RenaissanceRe Holdings ( RNR ) are most exposed, he said. Arch Capital Group ( ACGL ), which has increased its exposure in Florida, "could surprise with greater losses," he wrote in a note.

Among primary P&C insurers, he expects Chubb ( NYSE: CB ), Progressive ( NYSE: PGR ), and Allstate ( NYSE: ALL ) to be the most affected. Among those stocks, CB +0.8% , PGR -0.9% , and ALL -1.1% in Thursday trading.

"We expect insured losses from this event to be manageable, but sizeable earnings event and not a capital event for our coverage names," he wrote in a note to clients on Thursday.

Kinar expects that losses will drive further rate increases for reinsurers. He recommends that clients buy on recent weakness in reinsurers and still recommends owning brokers with reinsurance brokerage arms, especially A.J. Gallagher ( NYSE: AJG ), -0.1% , as well as Brown & Brown ( NYSE: BRO ), +0.5% .

Morgan Stanley analyst Michael W. Phillips also expects individual company exposures to be manageable and sees strong reinsurance pricing into 2023.

Looking at market shares of P&C insurers, Phillips sees Progressive ( PGR ) and Berkshire Hathaway ( NYSE: BRK.B ) ( NYSE: BRK.A ), which owns GEICO, as the most most exposed, as they top the market share leaderboard for Florida. The next biggest publicly traded insurer is Universal Insurance Holdings ( NYSE: UVE ) at No. 4.

Excluding auto physical damage, Universal Insurance Holdings ( UVE ) has the biggest market share in the state. The next publicly traded insurer in the top five is Progressive ( PGR ) at No. 5, Phillips said.

In August, RenaissanceRe ( RNR ) renewed its stock buyback plan, bringing its authorization up to $500M.

Take a look at the SA stock screener for P&C, reinsurance and broker stocks with over $2B market cap.

SA contributor Arbitrage Trader takes a look at Allstate ( ALL ) baby bonds as a way to insulate from interest rate risk.

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