Travelers Cos., the insurer added to the Dow Jones Industrial Average last year, may incur $183 million in costs from Hurricane Earl, Macquarie Group Ltd. said today.
The figure is based on an estimated $2 billion in insured damages in the U.S. from the storm, and the New York-based company’s market share in states that may be struck, analysts led by Amit Kumar said in a note to clients. The storm is expected to brush the Outer Banks of North Carolina overnight and pass within 30 miles of Massachusetts’s Nantucket island this weekend.
Travelers can withstand a loss of that size, and investors should buy the company’s stock if it falls during the storm, Kumar wrote. He recommended the same strategy for Allstate Corp., the largest publicly traded home insurer, which may face claims of about $161 million.
“Insurance stocks react adversely when a hurricane comes and then recover,” Kumar said in an interview. “In the short term, there’s a buying opportunity.”
Travelers dropped 9 cents to $50.22 at 4 p.m. in New York Stock Exchange Composite trading. Northbrook, Illinois-based Allstate slipped 5 cents to $28.62. Shane Boyd, a spokesman for Travelers, and Maryellen Thielen, a spokeswoman for Allstate, declined to comment.
Earl, a Category 3 Storm, has triggered mandatory evacuations and hurricane and storm warnings from North Carolina to Canada. President Barack Obama declared a state of emergency for North Carolina.
To contact the reporter on this story: Inyoung Hwang in New York at Ihwang7@bloomberg.net