The terrorist attacks that destroyed the World Trade Center wiped out Merchants Group's profits during the third quarter, the Buffalo-based insurance company said Thursday.
Merchants took a $1.99 million hit against its earnings because of claims that it expects because of the World Trade Center attack. Those estimated losses, which totaled 53 cents per share, caused Merchants to lose $809,000, or 35 cents per share, during the quarter.
The nearly $2 million in estimated World Trade Center losses includes $758,000, or 20 cents per share, for the projected cost of claims that the company already has received.
Merchants also has been reviewing the policies of customers who had offices near the World Trade Center and included estimates of what additional claims it might receive in its loss forecast.
"We have done our best to arrive at a conservative, though reasonable, estimate of potential losses," said Robert M. Zak, Merchants' chief operating officer. "It's possible that all of those claims may never come in."
Most of the claims are expected to come from business interruption coverage that Merchants had written.
The World Trade Center losses worsened what otherwise would have been a weak quarter for Merchants. Excluding the World Trade Center losses, Merchants' profits would have fallen to 18 cents per share from $1.7 million, or 68 cents per share, a year ago, mainly because of increased estimates of losses from the company's commercial automobile policies.
Merchants also said it expects its direct written premiums to fall next year, and possibly beyond that, because it will stop writing some types of policies that it no longer believes will earn a satisfactory return for its shareholders.
Those business segments will vary widely by region and the type of coverage, Zak said. For instance, the company earlier this year stopped writing policies for contractors that operate at significant heights.
The company's revenues slid by 3 percent to $26.7 million from $27.5 million, as its total premiums fell by 3 percent and its investment income and realized gains from its investments fell by 9 percent.