Leading the News: AIG's Extra Reserves Spook Rivals --- Added $2.8 Billion Hurts Stock, May Spur Insurers To Review Claims Exposure
American International Group Inc.'s announcement of a $2.8 billion increase to its insurance claims reserves sent shivers through the markets yesterday and rattled a property-casualty insurance industry that already has added more than $7 billion to its reserves this year.</br></br>As of 4 p.m. in New York Stock Exchange composite trading, AIG shares sagged $3.63, or 6.6%, to $51.70.</br></br>AIG's announcement, made late Monday, is the latest in a series of hits taken by the industry. The bulk of earlier reserve additions, however, have been related to lingering asbestos liabilities and claims from the Sept. 11, 2001, terrorist attacks. AIG's new reserves, linked to business written between 1997 and 2001, are for a broader array of policies, and thus the announcement is expected to prompt other insurers to once again re-evaluate the adequacy of their own reserves.</br></br>"This is an indictment of the entire industry's balance sheet," said William Yankus, a property-casualty analyst at Fox-Pitt, Kelton. The question being asked now is this, Mr. Yankus said: If AIG's underwriting wasn't adequate, how bad are the problems at other companies?</br></br>Another big property-casualty insurer, Chubb Corp., said yesterday it was taking a charge of $100 million related to its reserves for European directors-and-officers liability business. At the same time, Chubb said its net income for the fourth quarter was $56.6 million, or 33 cents a share, roughly double the $28.7 million, or 16 cents a share, a year earlier. Chubb shares were down $2.97, or 5.4%, to $51.60 on the Big Board.