J.P. Morgan Settles Surety Case With Insurers

In the dispute, insurance companies had argued that these trades were just disguised loans designed to infuse more money into failing Enron. However, because of the settlement, the insurers are now expected to pay about $655 million toward losses that J.P. Morgan Chase incurred.

"We have settled the dispute with all 11 insurance companies that have issued Enron-related surety bonds, and we will receive approximately 60 percent of the principal amount of $965 million," said William B. Harrison Jr., chairman and chief executive officer at J.P. Morgan Chase, during a conference call today.

"In terms of surety bonds, we believe our firm acted appropriately in all the transactions involving insurance companies. Nevertheless, given the environment we are in and the uncertainty of jury verdicts in complex matters like this, we believe that it was prudent to accept a reasonable settlement, which we think we have done," Mr. Harrison said.

Mr. Harrison added he was pleased to announce that, as part of the settlement, the court had dismissed a separate claim that J.P. Morgan aided a financial fraud on the insurance companies by Enron.

"The court dismissed one of the claims, which was that Enron had committed a financial statement fraud against insurance companies and that we had aided and abated that fraud," William McDavid, general counsel at J.P. Morgan Chase, explained at the conference call.

"That particular claim was dismissed by the court Monday night, and then a settlement was reached in a discussion that continued through last night and this morning," Mr. McDavid said. "We reached the agreement with 10 of them by early this morning and it took us another couple of hours this morning to put the last part of it to bed."

He added that whenever insurers pay on policies like this, they have the right of subrogation. "In this case, they have a right to tender their claims against Enron to us, at a valuation of 13 cents on the dollar, which could be up to $85 million out of the whole settlement amount," Mr. McDavid said.

The settlements include the following:

? Travelers Casualty & Surety Company and The Travelers Indemnity Company is expected to pay $159.6 million.

? The Chubb Corp.–$110 million.

? Lumbermens Mutual Casualty Company–$93.7 million.

? Fireman's Fund Insurance Company–$92.3 million.

? St. Paul Fire and Marine Insurance Company–$80.4 million.

? Continental Casualty Company and National Fire Insurance Company of Hartford, part of the CNA Financial Corp.–$46.7 million.

? SAFECO Insurance Company of America–$33.2 million.

? Hartford Fire Insurance Company–$24.5 million.

? Liberty Mutual–$13.4 million.

"Although we are convinced that our case was very strong, we decided to settle the suit for approximately half the amount of the claim in order to avoid the uncertainty of a jury verdict and the expense of the inevitable appeals that would follow," said John D. Finnegan, president and chief executive officer at Chubb, in a company press release.