Travelers will boost the reserve to $3.4 billion from $950 million, resulting in the $1.3 billion after-tax charge. The balance of the reserve adjustment is covered by an indemnification policy with Citigroup (C), its former parent.
The charge will result in a 2002 loss of about $27 million, or 3 cents a share. The company will lose $793 million, or 79 cents a share, in the fourth quarter.
"This reserve strengthening reflects a conservative view of trends that have become clearer over the last few quarters and our estimate of the projected ultimate cost of our asbestos liabilities," Travelers said.Moody's Investors Service, following the Travelers announced, lowered its credit rating on the insurer's long-term debt by one notch. The credit agency took the action because the $1.3 billion charge exceeded its own estimate of Travelers' asbestos liability. For 2003, the company expects to earn $1.7 billion and to post operating earnings of $1.8 billion.