AIG Estimates $1 Billion in Q1 Catastrophe Losses, Most from Japan

March 20, 2011

American International Group Inc. said it would post an estimated $1 billion in pre-tax catastrophe losses in the first quarter, mostly from exposure to the March 11 earthquake in Japan.

AIG said its exposure would be about $900 million after-tax. The losses apply to its Chartis unit, one of the largest property insurers in Japan and the world.

About 70 percent of the pre-tax loss comes from Japan, the company said on Friday, with the rest from flooding in Australia, U.S. winter storms, an earthquake in New Zealand, a cyclone and flooding in Brazil.

AIG said the loss figure would change as its exposure to the Japanese Earthquake Reinsurance Co. becomes clearer. JERC, as it is known, is the sole provider of earthquake insurance for homes and their contents in Japan.

Bailed-out AIG said it already had taken catastrophe reserves of $500 million in Japan for claims via JERC, and said the maximum pretax loss it could incur for such claims was $575 million.

Catastrophe modeling companies estimate the earthquake and subsequent fire and tsunami will cause the global insurance industry anywhere from $12 billion to $35 billion in losses.

AIG shares closed 2.1 percent lower at $34.95.

The shares have fallen 4.2 percent since the earthquake and about 20 percent since late January, when the company closed a recapitalization deal with the Federal Reserve and the U.S. Treasury Department.

At current levels, the Treasury stands to make a profit of more than $10 billion on its AIG stake, which it is expected to begin selling in May. The Treasury owns 92 percent of the company, which received a $182 billion bailout.

(Reporting by Ben Berkowitz; Editing by Ted Kerr)