The Hartford Enters Into Reinsurance Agreement Covering Asbestos And Environmental Liability Reserves With National Indemnity...
January 03 2017 - 8:00AM
Business Wire
- Agreement provides aggregate limit of
up to $1.5 billion for adverse net loss reserve development on
asbestos and environmental exposures
- Reinsurance premium of $650 million
will result in a fourth quarter 2016 charge to net income of $423
million, after-tax
- The Hartford to retain control of
claims handling for all exposures reinsured under this
agreement
The Hartford has entered into a definitive agreement effective
Dec. 31, 2016 with National Indemnity Company (NICO), a subsidiary
of Berkshire Hathaway Inc., for a $1.5 billion aggregate excess of
loss reinsurance agreement covering certain of The Hartford’s
asbestos and environmental liability exposures. The reinsurance
premium for this agreement is $650 million.
The agreement covers potential adverse development on The
Hartford’s existing asbestos and environmental reserves as of Dec.
31, 2016, excluding those held by the company’s U.K. Property and
Casualty (P&C) run-off subsidiaries, which the company is under
contract to sell and currently expects to close in first quarter
2017. The agreement provides up to $1.5 billion of reinsurance for
adverse net loss reserve development above estimated net loss
reserves of $1.7 billion as of Dec. 31, 2016. The Hartford will
continue to handle claims, subject to certain conditions, and will
retain the risk of recoveries under third-party reinsurance
contracts for these exposures.
“Our asbestos and environmental exposures have generated adverse
loss reserve development over time, creating uncertainty for
investors and others about the ultimate cost of these policy
liabilities, most of which were underwritten prior to 1985,” said
Chief Financial Officer Beth Bombara. “The agreement announced
today is consistent with our stated objective of evaluating options
that had favorable economics, while taking into consideration our
expertise in handling these complex claims. NICO is a very strong
counterparty and this agreement reduces uncertainty about potential
adverse development while allowing us to continue to handle both
claims and reinsurance recoveries, which we believe will enable us
to achieve the best possible resolution for these long-tail
exposures.”
The agreement will be accounted for in The Hartford’s fourth
quarter 2016 financial statements as a retroactive reinsurance
agreement, resulting in a charge of approximately $423 million,
after-tax, against fourth quarter 2016 net income, or a pro forma
impact of $1.10 per share to Sept. 30, 2016 book value per diluted
share of $48.30. The reinsurance premium is expected to have a
slightly negative impact on 2017 P&C net investment income and
does not affect the company’s expectation to execute its previously
announced 2017 capital management plan including equity repurchases
of $1.3 billion.
About The Hartford
The Hartford is a leader in property and casualty insurance,
group benefits and mutual funds. With more than 200 years of
expertise, The Hartford is widely recognized for its service
excellence, sustainability practices, trust and integrity. More
information on the company and its financial performance is
available at https://www.thehartford.com. Follow us on Twitter
at www.twitter.com/TheHartford_PR.
The Hartford Financial Services Group, Inc., (NYSE: HIG)
operates through its subsidiaries under the brand name, The
Hartford, and is headquartered in Hartford, Conn. For additional
details, please read The Hartford’s legal notice.
HIG-F
Some of the statements in this release may be considered
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. We caution investors that these
forward-looking statements are not guarantees of future
performance, and actual results may differ materially. Investors
should consider the important risks and uncertainties that may
cause actual results to differ. These important risks and
uncertainties include those discussed in our 2015 Annual Report on
Form 10-K, subsequent Quarterly Reports on Forms 10-Q, and the
other filings we make with the Securities and Exchange Commission.
We assume no obligation to update this release, which speaks as of
the date issued.
From time to time, The Hartford may use its website to
disseminate material company information. Financial and other
important information regarding The Hartford is routinely
accessible through and posted on our website at
https://ir.thehartford.com. In addition, you may automatically
receive email alerts and other information about The Hartford when
you enroll your email address by visiting the “Email Alerts”
section at https://ir.thehartford.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20170103005620/en/
The HartfordMedia Contact:Michelle Loxton,
860-547-7413michelle.loxton@thehartford.comorInvestor
Contact:Sabra Purtill,
860-547-8691sabra.purtill@thehartford.com
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