Hurricane damage hits AIG profits

Hurricanes Katrina and Rita are proving very costly for insurers

Claims for damage caused by Hurricanes Katrina and Rita have eaten into profits at US insurer American International Group (AIG).

AIG, the world's largest insurer, saw net income for the three months to 30 September fall to $1.7bn (£989m) from $2.69bn for the same period last year.

Estimated future losses from Hurricane Wilma are expected to reach $400m.

Despite the fall in profits, AIG said the scope and diversity of its business ensured it remained financially strong.

Expensive period

Experts believe Katrina could turn out to be the costliest natural disaster in US history, with estimated insured losses of up to $40bn.

AIG incurred catastrophe-related losses of $1.5bn in the third quarter, covering the period in which Katrina and Rita struck the US.

AIG has the capital and financial resources to respond to our customers' needs Martin Sullivan, AIG chief executive

The period was the most costly so far for the industry, AIG said.

"Catastrophes reduced AIG's general insurance results domestically as well as in our foreign operations," said AIG president and chief executive Martin Sullivan.

However, AIG said it still had the financial capacity to provide insurance coverage to those rebuilding areas devastated by Katrina.

"AIG's ability and commitment to continue as the leader in the property-casualty business is unwavering," Mr Sullivan added.

"Although reinsurance capacity could be constrained in the near future, AIG has the capital and financial resources to respond to our customers' needs."

Troubled year

Analysts expressed relief that the decline in profits was not steeper and AIG shares closed slightly up on Monday.

AIG has endured a troubled year after the firm and its former chief executive, Maurice Greenberg, were accused of accounting fraud.

The firm revealed in May that it had overstated its profits for the past five years by nearly $4bn.