US risk modelers have estimated insured losses from the devastating 8.8-magnitude earthquake that struck Chile at the weekend in a range of $2bn to $8bn. Massachusetts-based AIR Worldwide has estimated insured losses from the quake at more than $2bn and has listed total economic losses at more than $15bn. AIR senior vice-president Dr Jayanta Guin said that "total economic loss will likely be severe from damage not only to buildings, but from widespread impact on infrastructure, including roads, bridges, airports, and utilities and telecommunications networks". Late Monday, the death toll had risen to 723, largely in the area of Concepcion, the coastal city closest to the quake's epicentre. California-based Eqecat has estimated insured losses in a range of $3bn to $8bn and total economic losses at 10% to 15% of Chile's GDP, or $24bn to $36bn, based on estimated 2009 GDP of $244.3bn. However, with the quake centred offshore and impacting areas well outside Santiago, Macquarie analyst Bill Yankus said in a research note that "we do not foresee this as a potential pricing catalyst for the [reinsurance] industry". A curfew in Concepcion, the city most seriously hit by the quake, has been extended until midday local time. Residents are said to be short of food and water, with electricity supplies cut off. Meanwhile, a BBC team reported "widespread destruction" in the coastal town of Curico, while the seafront and centre of fishing village Constitucion was said by the mayor to be totally destroyed.

As anticipated at the weekend, US government-controlled insurer AIG has agreed to sell Asian life assurance subsidiary American International Assurance (AIA) to Prudential plc of the UK for $35.5bn. Under the deal, Pru is to pay around $25bn in cash, $8.5bn in equity and equity-linked securities and $2bn of its preferred shares. Pru intends to finance the cash component of the deal with a $20bn underwritten rights issue and a $5bn issuance of senior debt. For AIG, the divestiture marks its single largest asset sale to date as its seeks to pay off more than $90bn in obligations to the US government that have accumulated in the wake of a financial bailout that commenced in September 2008. AIG confirmed that it will use $16bn of the cash proceeds of the sale of AIA to redeem preference shares that the New York branch of the Federal Reserve acquired as part of the bailout and use the other $9bn to pay down debt under a New York Fed credit facility. A US Treasury spokesman said that the Obama administration supports the sale of AIA, calling it a "major step in the AIG restructuring plan to de-leverage, de-risk and pay back taxpayers". The acquisition will make Pru the largest foreign life assurer in the Asian market and establish Asia as the company's largest market. The deal will combine Pru's force of 420,000 agents in Asia's with AIA's 250,000 agents and establish Pru as the largest life assurer in Hong Kong, Singapore, Malaysia, Indonesia, the Philippines and other countries. Still, the deal has raised questions that Pru, as the Wall Street Journal suggested Monday, may have "bitten off more than it can chew". The $35.5bn price tag is around 1.8 times AIA's embedded value and will be justified only if AIA can adopt Pru's more aggressive marketing stance to boost sales through bancassurance relationships, the WSJ's "Heard on the Street" column said. Ratings firm Standard & Poor's said late in the day that it is weighing a downgrade for Pru owing to the size and weaker credit profile of AIA and "our view that the transaction will likely have a material adverse impact on Prudential's key credit metrics, such as capitalization and fixed-charge coverage".

Netherlands-based financial services group ING has said that it will be allowed to extend beyond the original 2013 deadline the sale of its insurance businesses, which was required as a condition of the company receiving state aid. ING said that the sell-off could be delayed if it begins the process with a stockmarket listing. Reuters cited an unnamed ING spokesman as saying that, if it goes to the market with at least 30% of the assets it has been told to sell, the original timetable for a sell-off would be relaxed. He noted the EU document, published last week, which stated that "whenever a divestment is being undertaken by an IPO process which has commenced and significant (30% or more) share placements have been made prior to the end of the divestment period, the Commission (in consultation with the Dutch state, ING and the Trustee) will actively consider allowing the entity more time to place remaining shares". ING has been told to sell some of its local mortgage activities, ING Direct USA and its insurance operations after receiving state support in 2008. Although ING is in talks about the penalty for the state aid being reduced, it is likely that the company would most want to hold onto ING Direct USA, rather than its insurance subsidiary. ING's chief executive Jan Hommen has said that he would prefer an IPO for the global insurance business (IIN24, November 12 2009).

UK-based insurance group Admiral has recorded net revenue of £507.5m ($756m) for 2009, up from £422.8m in 2008, on turnover of £1.077bn, up from £910.2m. The combined ratio rose to 92.1% from 86.5%. The 7% rise in pre-tax profit was lower than in recent years, attributed by Admiral to the cost of investing in overseas businesses, and a 60% fall in investment income to £15m. UK motor generated 87% of turnover and 96% of pre-tax profit. The combined ratio in this sector rose to 84.9% from 81.0%. Admiral underwrites only 27.5% of UK premiums, with Munich Re taking 50% in 2009, Swiss Re 10%, Hannover Re 6.25% and New Re 6.25%. For 2010 Hannover Re and New Re will take 10% each, Swiss Re will take 7.5% and Munich Re, specifically Great Lakes Reinsurance Co, will take 45%. Admiral said that it had pushed through base rate increases of 12% in UK motor for 2009, but the average written premium was roughly flat. Admiral estimated that 45% of all new motor business in the UK was now generated from price comparison web sites. Underwriting profit in the sector fell to £37.6m from £47.9m. The higher loss ratio, up 5% year on year to 66.9%, came mainly from a lower contribution from prior year reserve releases — down to £31.3m from £38.0m. Admiral benefited mainly from its significantly improved profit commission terms on co-insurance and reinsurance arrangements. The underwriting result plus profit commission was up 11% to £91.8m. At Admiral's price comparison web site Confused, profits were flat at £25.7m, compared with £25.6m in 2008. Non-motor business now generates 23% of Confused's revenue, up from 20% in 2008. Admiral's European comparison sites are now Rastreator in Spain, in which Mapfre has a 25% stake, LeLynx in France and Chiarezza in Italy — the last two opening in January and February this year respectively. Admiral's European motor businesses lost a total of £9.5m in 2009, up from £4.1m in 2008. The level of loss ratio continues to be high at AdmiralDirekt in Germany. While the loss ratio at Balumba in Spain has improved, the expense ratio worsened from 55% to 60%. No comments were made on claims inflation or claims frequency trends across the Group as a whole. Admiral declared a second interim dividend of 29.8p per share, representing a 57.5p dividend for the full year, up 10% on 2008, on basic earnings per share of 59p. Greig Paterson at investment bank Keefe, Bruyette & Woods said that Admiral was "well-positioned to take advantage of competitors' weakened balance sheets as the cycle turns".