Property insurance stocks, as well as reinsurance stocks veered lower Monday as investors watched Hurricane Milton take shape. Within an hour of the market open, Chubb was down around 4%, Everest Group 8% and Florida-focused insurer HCI Group 16%.
Warren Buffett's Berkshire Hathaway dodged heavy selling, falling 1.5%. Berkshire made a big bet that on Florida's reinsurance market in 2023, and it paid off. The company reportedly pulled back this year. However, Buffett accumulated shares of Chubb in Q2 to the tune of $6.7 billion.
Hurricane Milton Intensifies
Milton strengthened into a Category 5 storm, with wind speeds increasing by 95 mph over 24 hours, according to the National Hurricane Center in Miami. It ranked as the strongest hurricane this late in the year since 1966, and the strongest overall since Rita in 2005, the Washington Post reported.
The National Weather Service warned of risk of a life-threatening storm surge and damaging winds for the west coast of Florida beginning Tuesday night or early Wednesday. Heavy rainfall is expected today and Tuesday, which will raise the risk of major flooding.
The cone showing Milton's potential path has Tampa Bay roughly in the middle. A direct hit on Tampa would reportedly be the first in over 100 years.
Hurricane Helene Costs
The late-season storm approaches as states from Florida to Tennessee grapple with devastation from Hurricane Helene. CoreLogic has estimated that Helene will result in private insurance market losses of $6 billion to $11 billion for both wind and flood damage. In addition, the National Flood Insurance Program faces losses of $4.5 billion to $6 billion.
However, the real losses to property are much greater, with uninsured flood losses estimated $20 billion to $30 billion, CoreLogic says.
The large uninsured losses reflect the deep penetration of the storm to inland areas where flood insurance is not generally considered necessary.
Insurance Stocks: EG, CB, ACGL
Everest Group stock gapped moderately lower, then knifed through its 50-day moving average in heavy volume, a sell signal. On Friday, the Bermuda-based stock had broken above resistance to a 10-month high. Everest is a reinsurer, meaning it insures insurance companies, enabling them to limit their risk.
The reversal for Arch Capital Group came even more suddenly. ACGL stock on Friday turned a lower open into a positive reversal, clearing a tight trading formation to close at an all-time high. That's known as an outside day, where the day's high and low are higher and lower than the prior day's.
On Monday, ACGL is seeing another outside day, but this one is firm a sell signal. After moving higher at the open, ACGL quickly reversed and dived 6.7%, sliding to its 50-day line.
The volatile moves were particularly worth noting, in a group generally characterized by more tame and incremental action.
CB stock also cut through its 50-day average, with losses building to 4.65% in late afternoon stock market action.
Kinsale Capital Group was down 7.8% and Allstate 5.1%. Heritage Insurance, which offers insurance for single-family and condo owners in Florida, is sinking 24.45%, while HCI is down 17%.
Concerns over Hurricane Milton drove the day's worst performers in the S&P 500 — EG and ACGL. It also helped drive one of the best performers, IBD's Stock Of The Day, Generac, which sells backup generators.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
