From the November 14, 2011 issue of National Underwriter Property & Casualty • Subscribe!

Three Major U.S. Insurers Report Third-Quarter Struggles

Three large U.S.-based property-and-casualty insurers were unable to post third-quarter profits, with The Hartford stating its net income was flat and American International Group (AIG) and Liberty Mutual Group both reporting net losses.

AIG reported a third-quarter loss of $4.1 billion—the company’s worst since 2009—driven by declines in equity markets, widening credit spreads and lower interest rates.

AIG in 2010 posted a $2.5 billion third-quarter net loss.

Still, despite the poor results, CEO Robert H. Benmosche said during an earnings call that the company’s stress-testing withstood a “perfect storm” of factors during the quarter to maintain $15.3 billion in liquidity.

The value of AIG’s stake in Asian insurer AIA Group Ltd. fell, resulting in a $2.3 billion loss. Additionally, AIG’s plane-leasing business, International Lease Finance Corp., took a $1.5 billion impairment based on various economic, technological and counterparty issues.

Catastrophe losses did not help results, either. AIG’s P&C unit, Chartis, reported $574 million in third-quarter catastrophe losses—including $372 million from Hurricane Irene, $80 million from Tropical Storm Lee, and $79 million from typhoons Roke and Talas.

The third-quarter combined ratio at Chartis was 106.4, compared to 99.3 a year ago.

The Hartford reported $0 third-quarter net income, compared to $666 million in 2010. Its results were affected by $134 million in catastrophe losses and a charge of $227 million for deferred-acquisition costs (those incurred by insurers in the acquisition and renewal of insurance contracts).

The company’s combined ratio for its commercial business jumped 19.9 points to 104.8. On the personal-lines side, the combined ratio was up 12.7 points to 106.8 in the quarter.

Liberty Mutual Group reported a third-quarter net loss of $111 million (compared to net income of $567 million for the same period last year) due to the combination of catastrophe losses and reserve increases related to asbestos liabilities.

Third-quarter catastrophes amounted to $596 million, increasing the combined ratio 11.4 points to 110.5.

During a conference call with financial analysts, David H. Long, Liberty Mutual’s president and CEO, said the increase in asbestos reserves of $295 million was due primarily to increased legal-cost analysis.

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