GE Says Profit Won’t Meet Forecasts

FAIRFIELD, Conn. — General Electric Co., the largest company by market value, said Friday that its third-quarter profit will be less than analysts’ forecasts because of an estimated $400 million in losses at its reinsurance business after the terrorist attacks on the World Trade Center.

The company said net income will be about 33 cents a share, 4 cents less than the average estimate of analysts surveyed by Thomson Financial/First Call.

General Electric had profit of 32 cents a share in the year-ago period.

Claims resulting from the worst assault ever on the U.S. probably will exceed the $19 billion in damages caused by Hurricane Andrew in 1992 and the $14 billion from the 1994 Northridge earthquake, analysts said.

GE is not alone. MetLife Inc., the No. 1 insurance company, said its losses from the attacks may reach $300 million.

The New York-based company said the losses would shave third-quarter results by 35 cents to 40 cents a share. MetLife was expected to earn 57 cents in its third quarter, according to Thomson Financial/First Call.

GE’s Employers Reinsurance Corp. unit provided coverage on the World Trade Center as well as the four jetliners that were hijacked and crashed in Tuesday’s attacks in New York and Washington and near Pittsburgh.

Some investors and analysts said the losses don’t shake their confidence in the company’s ability to weather what already is a slowing economy.

The unit’s “losses due to the WTC tragedy are a nonrecurring event in the truest definition of the phrase,” said Mike Holton, an analyst at T. Rowe Price in Baltimore, which owns General Electric shares.

“Investors should take comfort in that GE would have delivered 15% [profit] growth in the most difficult economy in 10 years.”

The attacks may result in claims to reinsurance companies, which provide insurance for insurance companies of as much as $30 billion, analysts and investors have said. That also may lead to increased premiums, they said. Employers Reinsurance also provides primary insurance, including those for buildings.

“To GE’s credit, they have been able to put parameters around losses at [the unit] quickly,” said Thomas Mahowald, an analyst at American Express Financial Advisors in Minneapolis, which owns GE shares. “The insurance premium renewal season will start in January, and it is reasonable to expect that the reinsurance industry will be able to push through some price increases.”