By Katherine Hamilton

Shares of insurance companies, including Mercury General, Lemonade, and Kemper, fell Friday as investors assessed their exposure to the wildfires raging through Southern California.

Mercury shares slid 21% to $48.10 on Friday and are down about 26% since the fires began Jan. 7. Lemonade's stock fell 9% to $31.37 and Kemper's shares declined 3% to $62.76.

Other insurers whose stock prices fell Friday included Allstate, down 5%, as well as Travelers and Chubb, both down around about 3%.

The stocks fell as companies expect losses from fire damage, especially those with more policies in Southern California. Companies are expected to experience losses up to $1 billion, with total industry-wide losses around $20 billion, Keefe, Bruyette & Woods analyst Meyer Shields says.

Mercury, Lemonade and Kemper are among the public companies with the most exposure to wildfire damage, according to 2023 data published in a KBW note.

Of Mercury's roughly 4.5 million direct written premiums in 2023, more than 2 million are in areas where the wildfires could cause damage, according to the KBW report. Almost a quarter of New York-based Lemonade's direct premiums are exposed to the infernos. About 21% of Chicago-based Kemper's 3.8 million direct premiums are exposed.

Companies with a large share of policies within range of the infernos are at greater risk of loss, Shields said. That risk can be measured by looking at how many direct written premiums are within range of the fires. Direct written premiums represent the amount of money companies are collecting from insurance policies.

Farmers Insurance is the largest public company among the most exposed, with more than 17% of its 4.7 million premiums at risk of fire damage, according to the KBW report. Nationwide, Allianz and State Farm all have more than 6% exposure.

Pacific Specialty Insurance, a private firm based in Anaheim, Calif., had the highest exposure among both public and private companies, with almost 86% exposure for its 282,400 premiums.

Write to Katherine Hamilton at katherine.hamilton@wsj.com

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January 10, 2025 15:45 ET (20:45 GMT)

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