Updated from 11:02 a.m. EST
Asbestos will take a bite out of fourth-quarter earnings at
The Bermuda-based property and casualty insurer says it will take a $298 million charge in the quarter to boost its legal reserve to pay claims stemming from asbestos-related litigation. The charge will reduce earnings by $1.05 a share.
Before the announcement analysts were expecting Ace to earn $1.31 a share. Most analysts were expecting the insurer to set aside more money to cover asbestos liability, so some of the charge is likely already reflected in those estimates.
In early trading, shares of Ace were up 57 cents, or 1.4%, to $41.76.
Before the announcement, Ace had set aside about $3.74 billion to pay for asbestos and other environmental claims.
"This reserve strengthening continues our practice of periodically reviewing our A&E reserves from the ground up,'' said Ace CEO Evan Greenberg, in a statement.
Paying claims stemming from asbestos litigation is something that has bedeviled much of the property and casualty insurance industry for several years now. Ace is just one of many big insurers that has been boosting its reserve to pay claims, arising from massive class actions filed against companies that either manufactured or worked with asbestos products.
Asbestos is not the only problem Ace is struggling to contain. The company also has been implicated in the kickback and bid-rigging investigation initiated by New York Attorney General Eliot Spitzer and is trying to minimize the damage.
The company said the chief executive of its U.S. property and casualty brokerage division, Susan Rivera, had resigned. The company gave no reason for the resignation. But the division has come under scrutiny in the industry investigation.
Rivera joined Ace in 2002 and was responsible for overseeing all aspects of the company's commercial retail insurance operations in the U.S., according to the company's website. She came to Ace from
American International Group
, another big insurer that's been implicated in the scandal.
Spitzer's office declined to comment on Rivera's departure.
Last year, an Ace property and casualty employee pleaded guilty to a misdemeanor charge for taking part in a bid-rigging scheme orchestrated by
Marsh & McLennan
. The company also fired another employee and suspended three others because of the investigation.
Ace said its internal inquiry into the allegations raised by Spitzer's office is continuing.