ITT to Pump $680 million into Hartford Insurance Unit
NEW YORK (AP) _ ITT Corp. plans to invest $680 million in its Hartford Insurance Group subsidiary as part of a reorganization prompted by losses in two lines of business.
The reorganization will prompt ITT to record a third-quarter charge against earnings of $582 million, the company said Wednesday.
The investment in ITT Hartford includes $300 million cash and $380 million worth of stock in Alcatel Alsthom, a French industrial conglomerate.
The losses were suffered in the reinsurance and surplus lines written by ITT Hartford’s subsidiary, the Cameron and Colby group, based in Boston. Reinsurance is purchased by insurance companies to guard against major claims. Surplus lines are highly risky insurance products.
ITT Hartford will add $594 million after-tax to reserves to fund expected losses in surplus lines and reinsurance business written before 1986 by Cameron and Colby group.
Cameron and Colby was created in 1948 as part of ITT Hartford. During the past 6 years, ITT Hartford has taken charges to its earnings for Cameron and Colby’s high-risk business written before 1986, when it stopped writing new business.
However, ″recent losses on pre-1986 business, particularly associated with asbestos and pollution-related claims, (plus) general weakness in the reinsurance markets, require that these adjustments be made now,″ the parent company said.
ITT Hartford has also added reserves of $165 million after-tax for expected legal defense costs associated with environmental claims.
On the positive side, ITT Hartford will realize $177 million after-tax in capital gains in the third quarter, the parent company reported.
As part of the reorganization, Cameron and Colby will be transferred to ITT Corp., to be managed as an investment operation until claims against it have been resolved.
As a result of the moves, Moody’s Investors Service Inc. said it will review the debt of ITT Corp. and its ITT Financial Corp. and ITT Hartford Group subsidiaries for possible downgrade, Dow Jones news service reported.
ITT Corp. is a New York City-based conglomerate involved in the manufacture and sale of a wide range of automotive, defense and natural-resource products. It also owns the ITT Sheraton hotel chain.
ITT Hartford represents about half of ITT’s total sales and revenues and total book value. It is the ninth-largest property and casualty insurance company and 18th-largest life insurance operation in North America, with total assets of about $40 billion.