Could Floods Affect Investors?

Posted by: Ben Steverman on June 16, 2008

Wall Street might begin to feel the impact of the devastating and tragic flooding in the Midwest. And I’m not just talking about indirect effects, like damage to Midwestern states’ economies and higher food prices.

Stifel Nicolaus (SF) analysts Christopher Mutascio and Brian Zabora just released a note warning that Wells Fargo (WFC), for one, could be directly hurt by the floods. Why?

The San Francisco-based bank was the second largest underwriter of crop insurance by market share for the last three years. Wells Fargo’s 16.7% market share in 2007 was second only to ACE Ltd. (ACE), Stifel analysts say. Rounding out the top five crop insurers are NAU Country Insurance Co. (a private company), American Financial Insurance Group (AFG) and the German-owned Allianz Insurance Group.

It will take some time to find out if any or all of these firms have serious exposure to the flooded areas in Iowa and elsewhere. On Monday afternoon, none of these firms’ stock prices seemed affected by the possible danger. In fact, Wells Fargo shares were up more than 2% at one point Monday.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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