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Winter storm chills US P&C stocks ahead of earnings season


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Winter storm chills US P&C stocks ahead of earnings season

A recent winter storm sent a chill down the spines of investors as the wintry weather that plagued North America in December 2022 resulted in higher-than-expected losses for property and casualty insurers.

Last month, a winter storm cut a path across North America, killing more than 60 people, stranding thousands during the busy holiday season and racking up a damage total of approximately $5.4 billion across 42 U.S. states.

The impact of the storm was felt by various property and casualty insurers, including The Travelers Cos. Inc., which on Tuesday reported $459 million of pretax estimated catastrophe losses, or $362 million after tax, net of reinsurance. The company expects to report net income of $819 million, or $3.44 per share, and core income of $810 million, or $3.40 per share, for the quarter.

By midday on Friday, Jan. 20, 2023, Travelers' stock price had fallen 5.19% from the week prior, declining from $193.92 a share to $183.86.

Travelers' higher-than-anticipated losses were followed by similar announcements by The Hanover Insurance Group Inc. and The Allstate Corp., the latter of which reported an estimated adjusted operating loss of $335 million to $385 million for the fourth quarter.

Hanover and Allstate stocks also fell by 6.14% and 4.09%, respectively, by midday Friday from the week prior.

This contrasted with the broader market, with the S&P 500 falling 1.67% falling to 3932.19 for the week as of noon Friday, while the S&P 500 U.S. Insurance index lost 3.12%, falling to 595.12.

None of the three companies responded to a request for comment.

Winter storms

Unlike hurricanes and other event-based storms, Piper Sandler analyst Paul Newsome said the extent of damage from winter storms can take weeks to become apparent.

"Oftentimes you won't see the damage until the weather gets better and the snow melts and you find the hole in the roof that you didn't know existed," Newsome said. "That's part of the reason why we're getting surprised by these [catastrophe loss reports], because winter storms tend to make it take longer to figure out what the losses are."

On an individual level, the damage from each storm would not have a dramatic impact on these insurers, Newsome said, but a string of storms as well as other economic pressures have converged to make things more difficult.

"People are talking about capital and having weaker balance sheets for companies like Allstate, where you never would have thought that conversation could even begin a couple of years ago," Newsome said. "It's a combination of these inflationary trends, plus, it's been a really extraordinary sort of three or four years for weather."

Newsome said he expects a similar impact to be felt industrywide by other P&C insurers as more fourth-quarter earnings results are reported in the coming weeks.

GoHealth goes up

Amid a difficult time for insurtechs, GoHealth Inc., a health insurance marketplace and Medicare-focused digital health company, announced Tuesday that the company achieved positive preliminary operating results during the 2022 annual enrollment period.

According to the news release, GoHealth had positive cash flow from operations in full year 2022, which was sooner than the target of being cash flow breakeven by the first half of 2023.

"These positive preliminary operating results reinforce our confidence that our business transformation is working," Vijay Kotte, CEO of GoHealth, said in the release. "Achieving our cash flow goal ahead of schedule is an important validation of our operating rigor and beneficiary enrollment platform."

The market appears to have responded to GoHealth's announcement positively, with the insurtech's stock seeing a 12.98% bump in value for the week by noon Friday.

GoHealth was among several insurtechs to initiate a reverse stock split in 2022 in order to raise the value of its share and avoid being de-listed from the New York Stock Exchange.