Citigroup Warns Claims Will Cut Into 3rd-Quarter Profit

Citigroup Inc., the No. 1 U.S. financial services firm, said Monday its third-quarter profit will be cut by insurance claims from the destruction of the World Trade Center and by loss of revenue due to subsequent exchange and branch closures.

Shares of Citigroup, which owns major insurers Travelers Life & Annuity and Travelers Property Casualty Corp., closed down 6.7% at $39.60 on the New York Stock Exchange, just above the 52-week low.

Citigroup said it expected to pay out $500 million, after tax, in property, business interruption, workers’ compensation and life insurance claims.

That would make it one of the hardest-hit insurance and financial groups, which are expected to pay out as much as $30 billion in what is likely to be the most expensive insured event to date.

Closure of the New York Stock Exchange and some of the firm’s branches last week would cut earnings by an additional $100 million to $200 million after tax, Citigroup said.

The firm still has not accounted for four employees who were visiting clients at the World Trade Center.

“No monetary costs can compare with the human tragedy that our country experienced last week,” Sanford Weill, Citigroup chief executive, said in a statement. “However, as we begin to assess the damage incurred and the ensuing costs, we felt it important to give our shareholders an initial estimate of the financial impact on our company.

“Our company’s long-term earnings strength and our solid capital base remain unchanged,” he added.