Maurice Greenberg, chairman of American International Group, New York, addressed analysts, discussing the acquisition of American General Corp. as well as the impact of the World Trade Center catastrophe on AIG’s third quarter results.
Greenberg said during a conference call held earlier that AIG would take pre-tax charges of $1.36 billion related to the acquisition of American General Corp. and up to $800 million for costs related to the World Trade Center calamity. “We believe the number is accurate and if we err, it will be on the conservative side,” Greenberg told analysts when discussing the WTC calamity. The estimate provide by AIG following the Sept. 11 tragedy was approximately $500 million.
Greenberg said that AIG’s reinsurance coverage for WTC related liabilities was with highly rated reinsurers. Thirty percent was reinsured with AAA-rated reinsurers, 40% with AA-rated companies, 29% with A-rated reinsurers and 1% with less than A-rated companies.
Greenberg noted the ability of AIG to put together $1 billion in airline coverage in a few days time and the $50 billion in shareholder equity that AIG could draw upon.
The awareness of the need for life insurance has also risen since the attack, Greenberg noted.
Any legal claims will most likely be handled in the Southern District of New York rather than in a variety of state courts, a decision Greenberg said will cut down on unreasonable monetary awards.
Addressing a question on reinsurance capacity, Greenberg expressed confidence that even if CAT coverage became too expensive or difficult to obtain, “if we need more capacity, we will develop it. We will not let the market go unserved.”
He said that several versions of a reinsurance pool are under consideration in Washington and while the Bush administration is supportive, Congress still has to pass it.
“There needs to be a reinsurer of last resort,” he emphasized. Greenberg asked at what point do terrorist events stop being terrorist events and become war covered by war coverage clauses. At present, he said, that issue needs to be discussed and he had no answer to that question.
Greenberg remained optimistic over the future prospect of AIG’s business in China saying that through September, the company was maintaining its growth target.
Greenberg noted that AIG’s SunAmerica unit would be working to develop products to meet consumers’ current demands including a growing need for fixed annuities.
He also noted that AIG anticipated closing its acquisition of Hyundai Securities Co., Seoul, Korea, in late November.