COUNTRYWIDE COULD TAKE A HIT KATRINA FALLOUT MAY BE UPWARD OF $70 MILLION.

Byline: Evan Pondel Staff Writer

CALABASAS - Countrywide Financial Corporation on Monday said its losses from Hurricane Katrina could exceed $70 million, mostly related to the company's insurance business.

Known as a mortgage lender, Countrywide also has profits that stem from its Balboa Insurance Group. In the company's most recent quarter, Balboa earned $215 million in net premiums, while its Calabasas-based parent saw net earnings of about a half a billion dollars.

``While the financial impact of Hurricane Katrina to Countrywide is not determinable at present, we believe it will not be insignificant,'' Stanford L. Kurland, president and chief operating officer of Countrywide, said in a statement.

In other words, analysts are expecting Countrywide to shoulder significant losses from the hurricane, but probably not enough to sound alarms on Wall Street.

``I wouldn't call it a major concern,`` said Frederick Cannon, analyst with Keefe, Bruyette & Woods in San Francisco. ``Even if the losses were double ($70 million), it wouldn't affect the capital strength of the company.''

Despite Countrywide's strong financial standing, other insurers are bracing themselves for the worst. Risk Management Solution of Newark, Calif., estimates that private insurers would be liable for $40 billion to $60 billion in losses, up from the $20 billion to $35 billion the group projected last week.

But Countrywide has yet to change its earnings forecast. In fact, the company noted Monday that its mortgage loan servicing portfolio surpassed $1 trillion last month. That's comparable to an increase of $255 billion, or 33 percent, from August 2004.

Of course, Katrina could still prove financially debilitating to Countrywide. A portion of its Balboa subsidiary is devoted to the reinsurance business, which provides insurance backup coverage should the first line of defense fail for a policyholder.

In the case of Katrina, most property and casualty insurance companies cover damage from wind, not floods. That means Balboa might be responsible for flood coverage in ravaged areas throughout the South.

``They could be on the hook for that,'' said Edwin Groshans, analyst with Fox-Pitt Kelton in New York. ``Regardless, this hurricane is really a one-time event for Countrywide.''

The company has already made initial contributions of up to $1.6 million to hurricane-relief programs. And Cannon is standing behind his recent upgrade for Countrywide's stock performance.

Cannon upgraded the stock to ``market perform'' from ``underperform'' based on a relatively robust housing market and a decent valuation for the stock.

Shares of Countrywide rose $1.07, or 3 percent, to close at $35.74 Monday on the New York Stock Exchange. The company's 52-week low of $30.30 was last hit Nov. 5, 2004.

Evan Pondel, [phone]

evan.pondel(at)dailynews.com