AIG, the world’s largest insurer by market value, is now expecting $800 million in claims from the World Trade Center before taxes and net of reinsurance, Chairman Maurice Greenberg said in a conference call.
According to a Reuters report, this estimate is up from the firm’s initial estimate of $500 million in losses, made two days following the Sept.11 attack. Insurers and reinsurers worldwide have increased their loss estimates from the attack in recent weeks, and are now figuring to pay $40 billion or more in overall claims related to the tragedy.
Greenberg also said AIG would take $1.36 billion in one-time charges related to its purchase of insurer American General Corp. in its third-quarter results, expected on Oct. 25.
Some 40 percent of the charges – about $520 million — covers direct costs of the deal, including investment bank fees, employee severance costs and compensating American General executives, AIG indicated in a later filing with the Securities and Exchange Commission.
AIG plans to trim around 1,500 jobs from its 85,000 employee total over the next 18 months, and must also pay severance to Robert Devlin, American General’s CEO, who quit the firm shortly after the deal closed in late August.
The remainder of the charges — about $840 million — include the cost of closing down operations as American General is integrated into AIG, plus the write down of some assets and goodwill. That includes a charge of $125 million to write off losses from collateralized debt obligations, investments which must now be accounted for at market value, after recent changes in auditing practices. Last quarter, a number of other insurers took charges on similar investments.
Greenberg confirmed previous comments that the firm is targeting annual savings of $400 million from the deal.
He added that excluding the one-time charges and World Trade Center losses, AIG’s core third-quarter earnings, which will include the operations of American General, were “pretty much on target”.
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