Will Hurricane Irma cause insurers to drop?

Hurricane Irma is looking like it will blast a path through most of Florida in just over two days:

The media is making it look like that it will be apocalyptic. Indeed, the island St. Martin (famous for having an airport where you can sit on a beach and look up about 100 feet and see a landing Boeing 777 jet) was nearly annihilated. Right now Irma is one of the strongest (if not the strongest) in recorded history, but the question is where it will strike landfall in Florida (if there) and how much it will dissipate by that point – 75 miles can make a material difference in the damage calculation. If it goes through the heart of Miami, there will be tons of damage, but if goes through the western part of the peninsula, there’s a decent chance that the winds will slow down sufficiently by Tampa to still cause a lot of damage, but not the insane amounts the media is making it to be.

Thus while the media hype is overwhelming, the markets are treating certain insurers like the catastrophe is already a done deal, which may not be the case.

This is the classic information mismatch that creates market opportunity.

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Larger insurers can take the hit (most likely), and smaller, Florida-centric insurers like UVE have been grabbing the proverbial nickels before steamrollers. Even though the latter group is down quite a bit (something which started well before Irma), it’s debatable they have a sustainable business model, which is why many have been working to diversify away from FL and from simple property insurance. I’d rather own a large insurer at .7 alleged book still recovering from a host of sins and crises than a small, mostly single-state insurer at 1.4 book that’s been riding headwinds for nearly a decade. Still, talk about “too hard”!

& so on to the next storm!

Also, TBL has become more interesting, though I suspect still not your thing. They are looking into calling and refinancing their notes, which they can do as of 9/1. They’re currently paying 14%, a crisis rate; every 1% reduction in the rate will result in (pre-fees, etc.) ~$1.2 million annual savings. They’re not a super-cheap stock (~7.5 LTM EV/EBITDA; ~7x PE on avg E of last decade), but with successful refinance could be at an inflection point where benefits begin to accrue more, and significantly, to equity. TBD.

Hi Sacha
Your “subscribe to comments without entering one” is not working….(about a week now).

Sacha…the emailed verification is not hyperlinked….you must cut and paste….not a big deal, but thought I would let you know.

the hyperlink is not working with yahoomail……this most recent comment notice was not hyperlinked either.

That seems to have fixed it….thanks