A Plague Upon Insurers

There's only one word to describe the second-quarter results that the nation's property-casualty insurers are about to report: disaster.

The first half of 1992 brought a record number of catastrophes, both natural and man-made. Flooding in Chicago, rioting in Los Angeles, and a ton of tornadoes helped propel claims to $3.7 billion in the spring quarter, estimates American Insurance Services Group (AISG), an industry organization. That's a two-thirds jump over the year before. And prices for business insurance are down some 10% from 1991. No wonder Transamerica Corp. said on July 20 it planned to unload its property-casualty business.

Real estate woes are making matters worse at some companies. In June, Aetna Life & Casualty Co. said it would take a $46 million charge on a financial guarantee bond it issued to Olympia & York Developments Ltd. With second-quarter disasters shaving a further 20 a share off earnings, the company will be lucky to avoid a loss for the period, according to Salomon Brothers Inc.

FEROCIOUS WINDS. Wall Street's already meager expectations for insurers' earnings may be too rosy. Analysts had earlier forecast that CIGNA Corp.'s second-quarter earnings would come in at about $1.25 a share, down from $1.75 a year ago. But on July 17, CIGNA passed the word that even that sickly estimate was too high.

The Los Angeles riots were by far the single biggest calamity in the quarter. But the weather actually caused greater dollar damage. Insurers face $775 million in claims for the L. A. disturbances, AISG figures, while tornadoes in the Midwest caused more than $1 billion in losses.

Surprisingly, stocks of the major property-casualty companies have held up well. Salomon Brothers' insurers' index rose 6% in June, while Standard & Poor's 500-stock index fell 2%. But the market's patience may soon wear thin, unless premium prices stage a miracle comeback. About the best thing insurers can do now is pray to Mother Nature for a peaceful second half.

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