Travelers Says It Is Set For Asbestos Claims

By Daniel Hays

NU Online News Service, April 18, 12:32 p.m.EST? Travelers Property Casualty Corp., which set aside ahuge reserve for asbestos losses earlier this year, said yesterdayits first quarter profits have more than tripled and it foresees nofurther reserving for asbestos claims.

Company executives in a conference call with analysts also saidthat despite more stringency by reinsurers, Travelers is receivingreimbursement for claims at a normal rate.

The company said net income in the first quarter was $340million or 34 cents per share, compared to net income of $102. 1million or 13 cents per share in last year's first quarter.

Travelers said the results reflected the continuing hard marketthat permits rate increases as well as higher weather-relatedcatastrophe losses and charges for prior-year reserves.

In January, the company announced it was taking a $2.45 billioncharge ($1.3 billion after taxes) to bring its total reserves forasbestos up to a $3.4 billion level.

Doug Elliot, Travelers chief operating officer, said the companyis very comfortable with its reserve methodologies and is notprojecting any further reserve developments. However, he noted,should there be unexpected developments, "We'll adjustaccordingly."

Susan Stonehill Claflin, executive vice president for the firm'sliability group, said that in terms of newly-tendered asbestosclaims "we're not seeing anything different."

Robert I. Lipp, Travelers chairman and chief executive officer,in a statement before the conference, said the firm was workingwith other insurers, business, labor and representatives of thoseseriously harmed by asbestos to lobby Congress for legislativechanges related to asbestos.

During the conference, he said that legislation might involveremoving serious asbestos injury claims from the court system andproviding a trust fund to pay claims as well as creating strictermedical criteria for asbestos claims.

The company statement said Mr. Lipp was "hopeful" somethingwould pass this year, but he told analysts that when "dealing withWashington it's difficult to predict" and "we're not counting onanything" and he is reluctant even to use the word hopeful.

Ms. Claflin said possible benefits from legislation were "notanything we counted on when we set reserves."

Scott Belden, senior risk and reinsurance officer, saidTravelers, like other carriers, is encountering "an ongoingincrease in reinsurance company scrutiny of claims." He said thecompany has strong contract language in place and Travelerscontinues to collect reinsurance money at the same rate as in thepast.

"We collect 90 to 95 percent of the money within 90 days," hesaid.

Travelers said its Gulf Insurance subsidiary had incurred aprior-year reserve development charge of $174.9 million, resultingin a charge to Travelers of $145.5 million.

Company officials said the charge was related to a Gulf product,offered to dealers and others, insuring the resale value of leasedcars, which was impacted by a big drop off in used vehicle valueswhen zero-interest rates drew buyers to new cars.

Gulf is no longer offering such coverage and Mr. Elliot toldanalysts the company is focusing Gulf back on its areas of corecompetency, and that difficulties are not foreseen for any of itsother lines.

Travelers said it saw a 5.2 point improvement in itsconsolidated GAAP combined ratio, before catastrophes and prioryear reserve development.

The ratio improved from 97.4 percent in the prior year quarterto 92.2 percent- reflecting improvements in both the loss and lossadjustment expenses ratio and the underwriting expense ratio.

The company attributed the improvement to an environment, inwhich rate increases continue to exceed loss cost trends, and to ahigher volume of business.

The GAAP combined ratio reflects the negative impact of thehigher catastrophes and prior year reserve development, the companysaid. Mr. Lipp cited the impact of severe winter storms, notingthat heavy snow in Colorado had caused roof cave-ins.

Travelers said its net written premiums rose 16 percent to $3.17billion rising with higher rates and strong retention across allits lines. The company said its personal auto insurance book ofbusiness was up 12 percent.

Company officials said Travelers' appetite for new business wasdependent upon the class, and in some classes of constructioncoverage, it was withdrawing from the market. They describedworkers' compensation as the company line that needs the most work."It's not at our target levels," said Mr. Elliot.

The company said its earnings guidance calls for net andoperating income forecasts of $1.7 billion to $1.8 billion in2003.