PPG Industries $2.7 billion settlement of outstanding asbestos claims will cost the company around $500 million after tax, with more than 30 insurance companies eventually picking up the tab for the remaining $2.2 billion.
The settlement, announced yesterday, is one of the largest ever reached involving asbestos litigation. The bankrupt PPG affiliate, Pittsburgh Corning, which manufactured pipe insulation containing asbestos in the ’60’s and 70’s has filed documents listing over 435,000 asbestos-related claims. It will take over a year to finalize all of the particulars, but would end lawsuits, and further the reorganization plan for Pittsburgh Corning.
The plan announced that payments would be paid by PPG and its insurers over at 21-year period once the settlement deal is finalized and approved by the bankruptcy court. The $500 million charge reflects the current value of cash payments over the 21-year period and 1.4 million shares of PPG stock.
Hartford Financial Services commented that it would participate in the plan, and expected to eventually pay out between $120 and $150 million in settlement claims. The company indicated that its existing reserves for asbestos related cases were more than sufficient to cover this amount.
Travelers Property Casualty Corp. also issued a statement indicating that it expected to participate in the claims settlement when all of the terms were finalized. The company estimated its portion would be around $240 million after taxes, and would be covered by reserves and additional charges that would be taken if the settlement contingencies are met.
Travelers also noted that, as a member of Citigroup, it has an indemnification agreement involving asbestos related payments, which would reimburse the insurer for a substantial portion of its outlays.
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