“High catastrophe losses are likely to pressure property- and-casualty margins in the second quarter,” said Jimmy Bhullar, an analyst at JPMorgan, in a note to investors today. Bhullar rates AIG shares “neutral.”
Record catastrophes in the first half of 2011 are weighing on the Chartis property-casualty unit, which accounts for a growing share of AIG’s revenue after Chief Executive Officer Robert Benmosche sold non-U.S. life insurers. AIG had first- quarter losses of $1.7 billion on disasters including the March earthquake and tsunami in Japan. Insurers typically face the largest claims in the peak of the Atlantic hurricane season, which is in the third and fourth quarters.
A loss of $500 million from U.S. storms in April and May would rank AIG behind Allstate Corp. (ALL) and State Farm Mutual Automobile Insurance Co., which rely more on home and auto insurance. AIG’s property-casualty sales in the U.S. come mostly from its commercial insurance business, Bhullar said. Mark Herr, a spokesman for New York-based AIG, declined to comment.
Allstate has said April and May storms will cost the company $2 billion. State Farm, the largest U.S. home insurer, said June 16 that it has already paid almost $1.75 billion tied to the disasters. Storms in the period include the tornado in May that struck Joplin, Missouri, killing at least 150 people.
AIG hasn’t released a statement on second-quarter catastrophe losses, meaning costs likely won’t exceed the figure reported in the first three months of 2011, said Paul Newsome, an analyst with Sandler O’Neill Partners LP, in a note to investors on June 22. AIG announced Japan costs before the end of the first quarter.
Gains from AIG’s 33 percent stake in Hong-Kong-based life insurer AIA Group Ltd. (1299) may cushion catastrophe losses, Bhullar said. The holding, which AIG retained after divesting most of its AIA stock in a public offering last year, appreciated by more than $1 billion since March 31, he said.
AIG climbed 36 cents to $28.81 at 4:01 p.m. in New York Stock Exchange composite trading.
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