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AIG: Quake Losses from Its Stake in Fuji Fire & Marine Likely to Have "Minimum" Effect

Source: Dow Jones, AIG

Posted on 24 Mar 2011

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American International Group Inc. (AIG) released a statement on Wednesday updating its outlook on its potential losses for earthquake-related claims filed with Japanese insurance company Fuji Fire & Marine Insurance Co. in which it has a 55% stake. The insurer said that the losses are likely to have a "minimal" effect and will likely be covered by reserves that company has set aside.

Fuji Fire & Marine hasn't given a loss estimate for earthquake-related claims because its loss exposure depends on total industry losses, which haven't been determined yet. But the company has set aside about $482 million of catastrophe reserves, and Fuji Fire & Marine forecast that claims expected to make up the lion's share of losses will total about $508 million.

Fuji Fire & Marine's losses "will flow through AIG's income statement," AIG said, though it noted that it "expects minimal net effects on the statutory capital and liquidity of its local Japanese operations, including those of Fuji Fire and Marine, in light of existing local reserves."

Still, the earthquake in Japan will cost AIG in other ways--it said last week that its Chartis property-casualty unit expects catastrophe claims from the earthquake and other major disasters to cost AIG about $900 million in the first quarter. That preliminary estimate amounts to 1.1% of the company's total shareholder equity as of Dec. 31.