Lloyd's Reinsurer Equitas Reports Surplus Decline
NU Online News Service, June 11, 8:57 a.m. EDT? Equitas, a reinsurance vehicle set up in 1996 to reinsure non-life liabilities of Lloyd's of London syndicates, said in its annual results that it added another ?296 million (approx. $545 million) into reserves against asbestos, bringing its overall asbestos reserves to ?2.8 billion ($5.2 billion).[@@]
At the same time, Equitas' accumulated surplus?the funds from which it draws reserves?fell from ?527 million ($971 million) to ?460 million ($847 million) over the past year, according to the annual results for the year ended March 31, 2004.
However, Equitas pointed out that the ?67 million ($123 million) drop in the surplus was actually less than the ?296 million ($545 million) taken out for the asbestos reserves, because healthy investment performance?as well as lower-than-expected non-asbestos pollution and environmental claims?helped offset the money taken out for the asbestos reserve strengthening.
On the investment side, Equitas said its annual investment return came to ?395 million ($728 million), down from ?693 million ($1.276 billion) reported one year ago.
"Asbestos reserves have been increased, primarily due to a greater trend of higher payouts to abestosis victims and a worsening of claims," commented Equitas Chief Executive Scott Moser. "Much of this reserve increase was offset by successful results in other areas of operations?investments, claims settlements and reinsurance collections," Mr. Moser said.
Mr. Moser also remarked that the prospects of a Federal-level asbestos reform bill in the United States in the current Congress "now seem remote."
As of March 31, Equitas's surplus represented 9.8 percent of net claims outstanding, up from 8.7 percent one year ago. During the past year, Equitas paid out ?156 million ($287 million) in asbestos claims, down slightly from ?170 million ($313 million) during the previous year. Gross claims paid for all types of coverages amounted to some ?1.4 billion ($2.5 billion) last year, up from ?1.1 billion ($2.0 billion) during the previous year.
Equitas also noted that it completed agreements during the past year to close out asbestos claims for three of its five largest direct asbestos exposures and its largest reinsurance exposure, including those of Halliburton and Travelers. The overall asbestos reserves fell by ?900 million ($1.657 billion), Equitas pointed out, which reflects costs of making settlements and paying out claims.
Equitas estimates its asbestos liabilities at around ?4 billion ($7.4 billion). However, Equitas said it is only putting aside ?2.8 billion ($5.2 billion) to meet them for now because it expects investment returns to make up the difference. Including non-asbestos claims, Equitas has ?5.4 billion ($9.9 billion) in reserves to meet liabilities of ?7.2 billion ($13.3 billion).
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