Travelers U.S. arm takes asbestos reserve

The rating of Travelers Property Casualty Pool has been affirmed despite the company’s decision to strengthen reserves for it’s U.S. operation by US$2.55 billion. The move, which results in an after tax charge of US$1.3 billion on fourth-quarter 2002 results, was made after an extensive study of the company’s asbestos exposures. Following the announcement, rating agency A.M. Best affirmed Travelers’ A++ financial strength rating, which also applies to its Canadian arm, Travelers Casualty and Surety Co. of Canada. “A.M. Best views this A&E (asbestos and environmental) reserve strengthening as positive in that it should lessen future A&E earnings drag as well as help to narrow the gap between the company’s carried A&E reserves and A.M. Best’s view of A&E reserves,” comments that rating agency. It goes on to say that despite the charge, this is offset by a US$900 million capital boost from the parent company, as well as operating earnings and realized capital gains expected for the fourth quarter of 2002.