The Palisades fire and a handful of others continued to rake mountainside communities in and around Los Angeles on Thursday. With the stock market closed for the memorial of former President Jimmy Carter, investors had limited options with which to scan for financial impact from the blazes.
The fires have so far reportedly killed five persons. The largest fires are still burning, with new burns cropping up as the weather effect known as the Santa Ana winds continues to accelerate the speed and growth of the blazes.
The worst impact so far has been on Pacific Palisades, a wealthy community woven into the coastal mountains of northwest Los Angeles. The Palisades fire had, by late Wednesday, consumed more than 17,000 acres and destroyed at least 1,000 structures, according to CNN, making it the worst fire in the city's history.
In the San Gabriel mountains of northeast Los Angeles county, the Eaton fire as of early Thursday had burned more than 10,000 acres and was threatening about 13,000 buildings in the cities of Altadena and Pasadena. Both fires were reported as zero-percent contained early Thursday, by the WatchDuty website maintained by Sherwood Forestry Service.
At least two other fires were currently burning in the region, with about 130,000 evacuations ordered so far.
Wildfires And Stock Market Impact
With little impact on the scope of damage and specific types of structures and businesses so far affected, stock market impact has been limited. Fires often affect utilities stocks related to the area of the fire, particularly if there is some suspicion that the cause of the first was related to downed power lines or other grid-related factors.
The Los Angeles Department of Water and Power, which is not public traded, appears to be the main service provider for the area of the Woodley fire. At this early stage, authorities know where the fire started, but have not discussed a possible cause.
Shares of Edison International, the owner of Southern California Edison, dropped 10.2% on Wednesday and traded flat early Thursday. So. Cal. Edison had shut down power to a patchwork of areas in Southern California due to the fires.
The other obvious focal point for investors at this early stage is insurance stocks. JPMorgan released a note on Wednesday estimating that insurance industry losses from the ongoing Los Angeles fires will be "high but manageable."
The report saw losses related to the current fires as being confined mostly to the homeowners' insurance businesses at Allstate (ALL), Travelers and Chubb (CB), The Fly reported Wednesday. Commercial property businesses at Travelers, AIG (AIG), Chubb and Kinsale Capital (KNSL) were also expected to take hits, but to a lesser extent.
Palisades Fire Total Damages As High As $57 Billion: AccuWeather
Based on a preliminary assessment of the affected area and historical events, insured losses from this fire could approach $10 billion, with primary carriers being more exposed than reinsurers, the note said. Arch Capital (ACGL) and RenaissanceRe (RNR) are the most exposed reinsurers, but their losses should be less than for similar events prior to 2023, the JPMorgan note said.
Total losses could be much higher. Weather forecaster AccuWeather released a preliminary estimate Wednesday afternoon that put total losses from the current fires at between $52 billion and $57 billion.
Travelers increased its rates in California by an average 15% in May. The company was the seventh largest property and casualty insurer in the state in 2023, according to the National Association of Insurance Commissioners.
State Farm declined to renew thousands of policies in the state over the past year, including a reported 1,600 policies in the Pacific Palisades — one of the areas hardest hit in Wednesday's fires. State Farm was the state's largest insurer in 2023, followed by Farmers.
The Los Angeles Times reported that, in April, Tokio Marine America Insurance Co. and Trans Pacific Insurance Co. notified the insurance department that they will not renew 12,556 homeowners policies with a premium value of $11.3 million, starting July 1.
In December, KTLA 5 News in Los Angeles reported that Safeco, a subsidiary of Liberty Mutual, announced it would stop offering policies for new rental and condo customers on Jan. 1. Liberty Mutual is California's fourth-largest home insurer.
Mercury And Travelers Stock
Stock markets will remain closed on Thursday, somewhat obscuring any immediate market impact. But shares of Mercury Insurance dropped 6.5% on Wednesday and were off nearly 12% in after hours trade. The NAIC named Mercury as California's 10th largest insurer.
Other than that, action among the involved insurers was nominal.
Among the various types of insurance stocks showing chart action that has drawn IBD's interest, Hamilton Insurance was an IBD Stock of the Week in December. IBD's SwingTrader made a successful trade on the SPDR S&P Insurance ETF in November.
Dow Jones Industrial Average component Travelers earned a double-upgrade from Goldman Sachs on Wednesday, to buy from sell. The upgrade cited a combination of profitable commercial insurance lines and net interest income, positioning the company ahead of peers to beat 2025 expectations. An improving personal lines segment also carried upside. The analyst, Robert Cox, hoisted the stock's price target to 278, according to The Fly. That target was 15% above where shares traded on Wednesday.
Piper Sandler, Barclays and Jefferies had all lowered their price targets on Travelers (TRV) over the past month. Barclays maintained an overweight rating. Piper and Jefferies kept neutral and hold ratings, respectively.
Dow Jones Insurer Breaks Out On Results, Rival Eyes Buy Point
Travelers stock gained 42% through mid-November in 2024. MarketSurge stock charts show that it sketched a series of closely spaced bases and breakouts. After hitting a Nov. 18 peak, shares dipped back into another consolidation.
Travelers stock has now notched three weeks of tight closes. This can signal a stock forming a bottom to a consolidation.
Shares are tracking toward a fourth straight weekly close, up modestly so far in the current week, and trading midway between their 10-week and 40-week moving averages.
Travelers stock closed with a 0.5% gain on Wednesday.
Travelers carries an IBD Composite Rating of 91. Its Relative Strength Rating is a lukewarm 78, according to IBD's Stock Checkup.
