Hartford Financial Services Strikes Reinsurance Deal With Berkshire Unit

Hartford Financial Services Group said Tuesday it has reached a deal with Berkshire Hathaway’s (BRK.A) National Indemnity Company for a $1.5 billion aggregate excess of loss reinsurance agreement covering certain of its asbestos and environmental liability exposures.

The company said the reinsurance premium for the deal is $650 million and Hartford said it will be reflected in the Q4 financial statements with a $423 million after-tax charge, or a pro forma $1.10 per share to Sept. 30, 2016 book value per diluted share of $48.30.

Hartford said the deal covers potential adverse development on its existing asbestos and environmental reserves as of end 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.

“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,” CFO Beth Bombara said. “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.”

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