--AIG estimates Sandy claims at $1.3 billion after taxes
--AIG will send $1 billion to its property-casualty
operations
--AIG tally is twice the size of a Travelers estimate from
Wednesday
(Adds comparison to Travelers beginning in the second
paragraph.)
By Erik Holm
American International Group Inc. (AIG) said Friday it likely
took a $1.3 billion hit from Sandy, the massive storm that hammered
the Northeast in late October.
The insurer's tally was double the estimate from rival Travelers
Cos. (TRV), which said Wednesday it expected its Sandy claims would
take a $650 million bite out of fourth-quarter profit.
AIG said in a statement it would send $1 billion in "readily
available funds" to its property-casualty subsidiaries.
Disaster-modeling companies are predicting the insurance
industry as a whole may be on the hook for more than $20 billion in
Sandy claims, which would mark the storm as the second
most-expensive in U.S. history. But insurance executives, stock
analysts and credit-rating companies have been unanimous in saying
that large insurers will have little trouble absorbing the
costs.
AIG's Sandy estimate added further credence to those assertions.
It will more than wipe out the $786 million in operating profit
that AIG's property-casualty operations had earned through the
first nine months of 2012, but the property-casualty unit boasts
total equity of $49.6 billion.
Meyer Shields, an insurance analyst at Stifel Nicolaus, said
earlier this week that evidence is mounting that Sandy's tally will
hurt fourth-quarter results for insurers but "poses little threat
to most national insurers' balance sheets."
Still, the AIG estimate was significantly higher than a
corresponding figure from Travelers. Both companies estimates are
after taxes and reimbursements from reinsurance.
The difference may come in part from the types of coverage the
two companies provide. Both sell substantial amounts of commercial
insurance, but AIG generally covers larger companies and takes on
more difficult-to-price risks through its so-called excess and
surplus lines. The smaller companies covered by Travelers are more
likely to buy flood coverage from the federal government, while
larger ones purchase flood protection from the private market.
While AIG hasn't disclosed individual claims, it likely is on
the hook for more industrial properties in New Jersey and
skyscrapers in lower Manhattan that experienced substantial
flooding.
AIG itself was shut out of three of its offices in lower
Manhattan for weeks after the storm. It's now back in two of them,
but still waiting to re-enter its offices at 80 Pine Street.
AIG warned that its estimate involved the "exercise of
considerable judgement" and there was "no assurance that AIG's
ultimate loss associated with this storm will not differ from this
estimate, perhaps materially."
--Kristin Jones contributed to this article.
Write to Erik Holm at erik.holm@dowjones.com
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