Florida Suffers $30 Billion in Losses as Third Hurricane Looms
Sept. 14 (Bloomberg) -- Florida's economy, already reeling from an estimated $30 billion in damages from hurricanes Charley and Frances, braced for another blow as the third storm in a month threatened the state's panhandle region.
Charley caused about $17.3 billion in damage and Frances about $12.7 billion, according to Wachovia Corp. estimates. Insurance companies face as much as $12.8 billion in claims, and the state's citrus crop has been reduced by 20 percent. Florida, the world's 10th largest economy, has lost tourism revenue, and retailers such as Wal-Mart Stores Inc. have closed locations.
Ivan, the most powerful Atlantic storm this season, caused billions of dollars of damage and at least 60 deaths in the past week as it swept across the southern Caribbean. Packing winds that reached as high as 165 mph (265 kph), the storm destroyed 90 percent of the buildings on Grenada and submerged Grand Cayman Island with a 15- to 20-foot tidal surge.
``We've already had about $30 billion in damage,'' said Mark Vitner, a senior economist at Wachovia in Charlotte, North Carolina. ``Putting Ivan on top of that would be a rather large catastrophe for the state of the Florida.''
Tom Gallagher, the state's chief financial officer, didn't give an estimate of the damage in an interview yesterday from Tallahassee. The first two storms cost the state's $6 billion catastrophe fund as much as $2 billion, he said.
On its current track, Ivan is projected to hit the Alabama- Florida border early Thursday, said Jennifer Pralgo, a meteorologist at the National Hurricane Center in Miami. The storm had earlier been forecast to hit Florida's western coast.
Second Request
It would be the first time in 40 years that three hurricanes have hit the state in the same season. The last time was 1964, according to tropical meteorologist Dave Roberts of the hurricane center. Hurricane Dora struck Mayport, near Jacksonville, Roberts said, while Cleo hit just north of Miami and Isabelle landed in the Fort Meyers area.
Last week, the U.S. Congress approved $2 billion in emergency aid for Florida residents and communities hit by the storm after President George W. Bush requested the money. The Federal Emergency Management Agency said it is running out of disaster-relief funding and may begin operating at a deficit.
The administration will request more funding for hurricane disaster relief as early as today, FEMA Director Michael Brown said yesterday in an interview.
Risk Management Solutions Inc. estimated Frances will cost insurance companies as much $6 billion in claims. Charley will probably cost the insurance industry $6.8 billion, according to a review last week by Property Claims Services. The storms have made the third quarter the most costly since the Sept. 11 terrorist attacks in 2001.
Large-Scale Disasters
``We expect to experience large-scale disasters in Florida,'' said Robert Hartwig, chief economist of the New York-based Insurance Information Institute. ``It is something in the range of what we can handle.''
Hartwig said that while the industry is going through a ``painful quarter,'' changes made after Hurricane Andrew in 1992 are helping the insurance industry through hurricanes this year.
Andrew was the most expensive storm in U.S. history, causing $20.3 billion in claims, and is a benchmark used by the industry to set aside reserves. Insurance companies as much as tripled the rates they charge Florida homeowners since Andrew and set a separate deductible for hurricane damage.
``The industry is in a much better position to handle large- scale disaster than 12 years ago,'' Hartwig said.
Tourism
Florida's $52 billion tourism industry, the state's largest, probably lost about $1 billion in revenue because of the first two storms, Vitner of Wachovia said.
JetBlue Airways Corp., Carnival Corp. and Walt Disney Co. are among the tourism-related companies saying profit will suffer after canceling flights, rerouting cruises and closing entertainment parks when Hurricane Charley hit Florida's western coast Aug. 13 and Frances hit the eastern coast Sept. 5.
Business lost at Disney's Walt Disney World theme park in Orlando and its cruise line will slice 1 cent a share a share off fourth-quarter earnings, the company said in a statement. Carnival canceled three sailings because of Frances, which will reduce fourth-quarter net income by as much as 4 cents. Frances also prompted JetBlue to cancel 262 flights.
Florida's agricultural industry has suffered $2.15 billion in losses from the two hurricanes, according to Liz Compton, a spokeswoman for the state's Agricultural Department.
Crop Losses
The U.S. Agriculture Department estimated Charley reduced Florida's citrus crop by 20 percent. Damages from Charley were estimated at $285 million, while Frances cost about $200 million, according to Florida Citrus Mutual, a trade group that represents about 11,000 growers. Citrus is a $9 billion annual industry in Florida.
``Hurricane Frances really dealt a blow to the east coast of Florida, with up to 12 inches of rain over a 24-hour period,'' Andrew LaVigne, chief executive of Florida Citrus Mutual, said in an interview. ``Those two hurricanes hit eight of 10 of our top citrus counties in the state of Florida -- about 530,000 acres.''
Frozen concentrated orange juice futures are up 34 percent in the past month and touched a 52-week high last week.
The state's $9.9 billion nursery industry lost as much as $600 million during the storm. Costs from the storms are set to rise higher as trees rot and livestock die because of the waterlogged conditions in the state.
``There's nowhere for the water to go,'' Compton said. ``We're very concerned about Ivan -- it's too soon.''
Retail Sales
Retailers Home Depot Inc. and Lowe's Cos. were helping residents clean up and rebuild. Home Depot, the world's largest home-improvement chain, has been consolidating truckloads of products such as chainsaws from out-of-state locations to ship to Florida, Chief Executive Robert Nardelli said in an interview Friday in New York.
Lowe's, the second largest home-improvement chain, planned to shipped almost 500 truckloads of plywood to Florida as people stocked up on batteries, flashlights, barbecue grills and generators at a ``very rapid rate,'' spokeswoman Chris Ahearn said.
Wal-Mart closed more than 150 stores and distribution centers in Florida over the Labor Day holiday weekend because of Frances, spokeswoman Sharon Weber said. Sales in the region picked up after the storm passed. About 200 of the company's 3,600 U.S. stores are located in Florida.
Bond Ratings
AutoNation Inc., the largest U.S. retailer of new and used cars, reduced its third-quarter profit forecast because Frances and Charley hurt sales in Florida. The state accounts for 30 percent of revenue, the Fort Lauderdale-based company said in a statement.
The company has been protecting cars at its Florida dealerships by moving them to parking garages, showrooms and other protected structures before the hurricanes.
Fitch Ratings said the hurricanes wouldn't prompt it to lower the bond ratings of state and local governments because money spent for cleanup and rebuilding would be reimbursed by the federal government and private insurance policies. Moody's Investors Service also said the hurricanes wouldn't damage local credit ratings.
``Municipalities' cash flow may be affected in the near term as residents await reimbursement and tourism is impacted, but Fitch's ratings incorporate a local government's reserves available to accommodate emergency situations,'' Fitch said in a report released Wednesday.
Federal Assistance
The state of Florida has $1 billion in reserve to cushion immediate budget outlays, and rebuilding activity is expected to generate more fees and sales tax revenue, Fitch said.
The president visited the state after both storms to see the damage and is in contact with his brother, Florida Governor Jeb Bush, to make sure the state is getting enough federal assistance, said Trent Duffy, a White House spokesman.
Florida is a battleground state in Bush's re-election race against Democratic candidate Senator John Kerry of Massachusetts. The state determined the outcome of the 2000 election after the U.S. Supreme Court halted a recount in the state 36 days after the balloting, leaving Bush with a 537-vote margin over Democrat Al Gore.
``There's nothing political about'' the rush to provide aid to Florida, Representative Bill Young said. Young, 73, a Republican whose district includes St. Petersburg, said the emergency funding is ``a strong, bipartisan approach to an honest- to-God disaster.''
The American Red Cross forecasts recovery efforts for Charley and Frances will total $67.8 million. The Red Cross Relief fund has about $38.6 million in donations.
``We don't know what Ivan's going to cost until we know what it's going to do,'' spokesman Patrick McCrummen said. ``We're really dependent on the generosity of the American people.'' |
