|
Insurance stocks drop
|
 |
September 17, 2001: 6:48 p.m. ET
Insurance claims of $20B or more expected; GE slides, then recovers
|
NEW YORK (CNNfn) - Shares of insurers fell Monday in response to the World Trade Center attack with insurance claims of $20 billion or more expected.
General Electric Co. stock fell nearly 21 percent, to $31.15, in early morning trading before recovering and finishing Monday down nearly 11 percent.
Fairfield, Conn.-based GE (GE: Research, Estimates), through the Employers Reinsurance Corp. division of its GE Capital unit, said last Friday that the WTC attack would reduce third-quarter net income by 4 cents. GE had expected to meet First Call third-quarter estimates of 37 cents a share but now sees reporting earnings of 33 cents a share.
|
|
VIDEO
|
|
 CNNfn's Valerie Morris takes a closer look at the insurance industry and the early claims estimates. |
|
Real
|
28K
|
80K
|
|
Windows Media
|
28K
|
80K
|
|
Last week's terrorist attack on New York's World Trade Center likely will cost insurers billions of dollars and could even surpass the costs of Hurricane Andrew in 1992. Insurers paid over $19 billion for that natural catastrophe.
U.S.-based insurers, as well as international providers, are expected to foot the bill. The National Association of Insurance Commissioners said Monday that losses are expected to reach or even surpass $20 billion.
Earlier estimates last week set the total exposure at $10 billion to as much as $30 billion in claims.
However, insurers will withstand the losses.
"Policyholders can rest assured knowing that the insurance industry in the United States is a $1 trillion industry with assets of more than $3 trillion," NAIC President Kathleen Sebelius said. "Therefore, preliminary loss estimates of $20 billion represent only 2 percent of the premiums written in 2000."
Lloyd's says can manage exposure
Lloyd's of London, the world's biggest and oldest insurance market, has completed a preliminary estimate of its potential exposure to attacks in the United States, and that backed by its $27 billion in assets, it believes it can manage its exposure, the company said Monday.
Lloyd's said last week that it has substantial involvement in the insurance of United Airlines, American Airlines, and the WTC.
However, Lloyd's still declined Monday to quantify the extent of its liability to the WTC attack. Lloyd's also has exposure to more than just airlines and the WTC But also provides workers compensation, business interruption and key man insurance.
"We have a whole range of different type of coverages and at this stage it's too early to quantify," Lloyd's spokesman Adrian Beeby said.
Any estimates of total insurance liability due to the attack are still guesses, said Joe Annotti, spokesman of the National Association of Independent Insurers.
"It will be a week or two at least before we get a real good ball park," Annotti said.
Drop for insurers
"This was not unexpected," said analyst Kenneth Billingsley of Friedman Billings Ramsey, regarding the drop in insurance sector shares. "Everything we track is in the red."
Shares of insurance companies likely will be off for the rest of the week as markets recover from and make up for the four days of non-trade.
Billingsley picked New York-based American International Group as the mostly likely to weather the storm. AIG, the largest commercial lines provider in the United States, said last week that it expects pretax losses of about $500 million from the WTC attack.
"AIG is still going to be a strong company," Billingsley said. "You can't find any better quality than AIG."
Shares for AIG (AIG: down $0.59 to $70.41, Research, Estimates) hit a low of $66 Monday, for a loss of 11 percent, before recovering and closed down 4.39 percent.
The picture is not so bright for Bermuda-based ACE (ACE: Research, Estimates) which, through its subsidiaries, underwrites a significant amount of commercial lines and also provides catastrophe reinsurance. ACE shares dropped to $26.75, down nearly 19 percent, before recovering and finished Monday at $28.51, a decline of nearly 14 percent.
New York-based MetLife hit a low Monday of $25.30, a drop of 12 percent, before rebounding and shedding 7 percent to close at $26.91. Last Friday, MetLife Inc. said it would incur losses from the WTC destruction of about $250 million to $300 million.
The attack will cut MetLife's (MET: up $0.28 to $27.19, Research, Estimates) third-quarter income by 35 cents-to-40 cents a share, the insurer said in a statement.
John Hancock Financial Services Inc., which does not expect the WTC incident to materially impact earnings, shed nearly 6 percent before recovering. Shares of Boston-based John Hancock (JHF: down $0.25 to $36.43, Research, Estimates) were down just 1 percent by the afternoon.
Allstate, which also does not expect to be impacted by the WTC destruction, dropped nearly 12 percent before rebounding. Allstate shares finished Monday off nearly 5 percent.
Northbrook, Ill.-based Allstate (ALL: down $0.64 to $32.86, Research, Estimates) does not write large-risk commercial insurance but focuses on small commercial policies, primarily for commercial autos and fleets.
Hartford, Conn.-based Aetna Inc., which provides health-care and group benefits, expects $10 million to $15 million in pretax losses due the attack. The insurer's payments for life insurance are usually in the $1 billion range but Aetna does not expect an increase in medical claims due to the destruction.
Shares of Aetna (AET: up $0.91 to $29.05, Research, Estimates) hit a low of $26.69, a near 8 percent drop, but like the rest of the sector, recovered. The stock closed Monday off nearly 3 percent. 
|
|
|
|
|
 |
|
