View this article online: https://www.claimsjournal.com/news/national/2006/06/16/69595.htm
The Hartford Financial Services Group has entered into an agreement with Equitas, the Lloyd’s runoff vehicle, and all Lloyd’s syndicates reinsured by Equitas that “resolves, with minor exception, all of the company’s ceded and assumed domestic reinsurance exposures with Equitas, including the company’s reinsurance recoveries from Equitas under the company’s Blanket Casualty Treaty,” said a Company bulletin.
The precise terms of the settlement agreement were not disclosed.
“This agreement is a significant step in our efforts to remove volatility from our ceded and assumed reinsurance portfolio,” indicated Neal S. Wolin, The Hartford’s executive VP and general counsel. “The settlement eliminates uncertainty from our domestic assumed reinsurance book with Equitas. It also resolves our single largest reinsurance recoverable, bringing years of litigation with Equitas to a close.”
The Hartford explained that the “Blanket Casualty Treaty, which was the focus of the litigation, is a multi-layered reinsurance program that provided for excess-of-loss coverage for The Hartford in various amounts from the 1930s through the 1980s. The upper layers of the treaty were first put in place in 1950, primarily with London Market reinsurers, including Lloyd’s syndicates. The Blanket Casualty Treaty litigation continues with the other upper-layer reinsurers under the treaty.”
Commenting on the settlement Standard & Poor’s Ratings Services said that it ” is taking no rating action on Hartford Financial Services Group Inc.” S&P currently rates the Company as “A” with a stable outlook and “A-1” for its debt ratings.
In addition The Hartford announced that during the second quarter it had “completed three comprehensive reserve reviews on business reported in the Property and Casualty Other Operations segment. First, the company reviewed all reinsurance recoverables and the allowance for uncollectible reinsurance. Based on this study and the agreement with Equitas, the company will record a charge of $243 million pre-tax, or $158 million after-tax, in the second quarter.
“Second, the annual, ground-up asbestos review resulted in no addition to the company’s asbestos reserves. Finally, the company also completed its review of reserves related to HartRe’s assumed reinsurance business, which is in runoff. This study resulted in no material impact to the company’s earnings.”
The bulletin said that as a result The Hartford currently “expects a second quarter 2006 pre-tax underwriting loss in its Other Operations segment of $268 million. The company’s most recent guidance for 2006 core earnings per diluted share, as provided on April 27, 2006, assumed a second quarter pre-tax underwriting loss of $58 million in Other Operations.”
S&P noted that it “views the commutation with Equitas and the end of associated litigation as a favorable development. The after-tax charge will be easily offset by operating earnings in the second quarter and should have no impact on capitalization, so there is no rating implication for Hartford or any of its property/casualty insurance subsidiaries.”