Cincinnati-based American Financial Group Inc. announced that its principal property and casualty insurance subsidiary, Great American Insurance Company, had been notified of an arbitration decision resulting from its share of a 1995 property fire and business interruption claim.
Unless challenged by one of the other parties, it is anticipated that the decision of the panel will be submitted for entry of judgment to the Federal District Court and become final shortly. Based on these developments, AFG announced that its second quarter earnings will include an after tax charge of approximately $29 million, or $.41 per share, for the claim.
The charge represents Great American’s share of the claim, net of previously recorded reserves and payments. The company was a 9.5 percent participant with a number of other companies in the insurance pool that insured the loss during the 1995 coverage year. Great American reduced its participation to 0.2 percent in the following year and no longer participates in the pool.
Based on appraisals, legal advice and relevant policy provisions, Great American made substantial payments to the insured subsequent to the loss. In addition, Great American had established reserves in excess of payments previously made with respect to disputed portions of the loss.
Carl Lindner III, co-president and head of AFG’s property and casualty operations, noted, “We were surprised and disappointed with the outcome of this arbitration. We believe that the result reached beyond reasonable interpretation of the underlying facts and the policies written. Nevertheless, we look forward to closing this disputed matter.”
As a result of this matter, and after review of the company’s earnings to date, Lindner added, “We are revising our 2003 core earnings expectation to $2.10 to $2.30 per share, including the arbitration charge.”
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