With hurricane season rapidly approaching, investors need to be prepared for the potential financial impact. Historically, hurricane season has wreaked havoc on various industries, leading to substantial losses. The insurance industry is particularly heavily affected and faces damage claims caused by hurricanes.
The 2024 hurricane season is predicted to be particularly intense, with experts forecasting an above-average number of major storms. This year’s Atlantic hurricane season is anticipated to be one of the most active ever recorded. According to experts at Colorado State University, the current season will have 23 named tropical storms, including 11 hurricanes and five major hurricanes. This potentially makes 2024 one of the most active seasons on record.
As the threat of hurricanes looms large, it’s crucial for investors to reassess their portfolios. Hence, here are three stocks that you should consider dumping now to shield your portfolio from the impending storm season.
Allstate (ALL)
Allstate (NYSE:ALL) holds a significant market share with a presence in one out of eight households. As a major player in the insurance industry, Allstate is significantly exposed to various risks, including natural disasters such as Atlantic hurricanes. The adverse weather events can have several negative impacts on the company, affecting its financial stability and operational efficiency.
Allstate has previously been adversely affected by hurricanes, leading to net losses. In the third quarter of 2022, Allstate projected a net loss of $675 million to $725 million. This was primarily due to Hurricane Ian. Additionally, Allstate reported significant losses due to severe weather, which negatively impacted its financial performance and stock price. The insurer’s shares fell after the company revealed a net loss of $1.4 billion for the second quarter of 2023.
Over the past decade, Allstate’s revenue growth has been relatively slow, growing at a CAGR of 5.9% from 2014 to 2023. The company’s net income has continued to be volatile, impacted by high claims and realized losses from its investment portfolio.
American Airlines (AAL)
American Airlines (NASDAQ:AAL) is one of the largest airlines in the world, headquartered in Fort Worth, Texas. The company operates an extensive domestic and international network, with hubs in major cities including Dallas-Fort Worth, Miami, Chicago O’Hare, and Charlotte.
Atlantic hurricanes can significantly impact American Airlines in various negative ways. One of the most immediate effects is the disruption and cancellation of flights. When a hurricane approaches, airports in its path often shut down, causing widespread cancellations and delays. Moreover, financial losses are another major consequence. The airline loses ticket revenue from canceled flights and incurs additional costs from issuing refunds or rebooking passengers on alternative flights.
In the past, American Airlines has been negatively impacted by hurricanes in the past. Hurricane Harvey caused severe flooding in Houston, Texas, leading to the closure of George Bush Intercontinental Airport and William P. Hobby Airport for several days. American Airlines had to cancel numerous flights to and from Houston, significantly disrupting operations and causing financial losses. The flooding also affected other airports in Texas and the surrounding regions, leading to further cancellations and operational challenges.
Travelers (TRV)
Travelers (NYSE:TRV) is a leading provider of property and casualty insurance for auto, home, and business. Extreme weather has consistently posed challenges for the insurance industry, with global insured losses from natural disasters in the first quarter estimated at $20 billion.
Travelers reported Q1 2024 earnings with core income of $1.1 billion or $4.69 per diluted share, missing estimates by 17 cents. The company’s revenue was $10.13 billion, up 14.37% year-over-year (YOY) but missed estimates by $80 million. The company missed its first-quarter profit estimates due to significant losses from severe storms in the United States, which drove up catastrophe-related expenses. For Travelers, losses surged to $712 million from $535 million a year earlier.
Moreover, the company was also negatively affected by Hurricane Harvey in 2017. Travelers, like other insurers, faced a significant increase in claims related to property damage, auto damage, and business interruptions. This hurricane led to substantial payouts and impacted the company’s financial results for the quarter of that year.
On the date of publication, Mohammed Saqib did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.