Fitch Inc. the New York-based ratings agency on Wednesday said that it may place 12 to 17 organizations within its universe of coverage on watch, and has already downgraded a handful of companies, because of the impact of last weeks terrorist attack on their bottom-line.
While Fitch said it will not provide a more detailed list of companies most affected until today, on Wednesday the company downgraded its outlook for New York- based financial services company American Express Co., and its subsidiaries to negative from stable. The downgrade reflects the intermediate term uncertainties for the company, Fitch said.
Amex, which has its headquarters adjacent to the site of the attack, is expected to be affected heavily by the falloff in business travel and reduced transaction spending, areas that had already been hampered by a flailing economy. Fitch anticipates that American Express near-term performance will also be impacted by weaker capital markets are likely to result in lower levels of investment management income.
Standard & Poors, which downgraded its outlook on the company to negative from stable citing the same concerns followed Fitchs move Thursday.
Fitch also noted that the attacks in New York impacted most of the large broker-dealers operationally and Eileen Fahey, head of the Fitchs broker-dealer group, cited Morgan Stanley as particularly vulnerable due to its exposure to the airline lease finance business and credit card operation, Ms. Fahey said. However, Ms. Fahey said, We have not identified any investment bank with excessive exposure to either the airline, travel, leisure, insurance or retail industry. The investment banks stock fell 10.41% Thursday, while American Express stock rose .08% Thursday.
Meanwhile, Fitch estimates there will that property casualty insurance business will face claims of more than $30 billion, while insurers will also be looking at $3 billion to $5 billion in life insurance claims. The rating agency is particularly uncomfortable with reinsurance firms, according to Keith Buckley, head of Fitchs insurance group, who spoke on a company conference call Wednesday. However, Mr. Buckley added, We feel that claims will be paid on time and the debt obligations for a vast majority of companies will be paid on time.
Mr. Buckleys sentiment had been preceded Tuesday, by a statement from Standard & Poors in New York, indicating it may put the ratings of many insurers and reinsurers on CreditWatch with negative implications.
Estimates are typically understated, Mr. Buckley said. Wild cards that might evolve over time include liability exposure, business interruption insurance, reinsurance collection disputes and psychological counseling claims, Mr. Buckley said.
Fitchs U.S. bank group specialist did not sound overly negative on that sector Wednesday.
We think right now the banks have strong levels of capital, strong reserves and relatively well diversified earnings streams that they can address immediate near term issues, said James Moss, who heads the U.S. bank group at Fitch.
Our ratings and our ratings outlook do not incorporate a view that there is going to be a sharp recession or a prolonged economic slump even at current levels, Mr. Moss said.
Meanwhile, in another messy day in the markets the Dow Jones Industrial Average closed down 4.37% and Standard & Poors 500 Index fell 3.11%.
David Reich-Hale contributed to this story.