Equitas Reports Six-month Results

December 5, 2002

Equitas, the run-off vehicle set up by Lloyd’s to handle pre-1993 claims, reported its results for the six months ending Sept. 30. Overall claims paid dropped to £451 million ($704 million), compared to £798 million ($1.245 billion) for the first half of last year.

The fall in equity values did not hurt Equitas too much during the period. The announcement indicated that it held £383 million ($598 million) in equity investments as of March 31, 2002 out of a total portfolio of £5.7 billion ($8.9 billion). Equity values declined by £110 million ($172 million) during the period; however, overall investment returns totaled £556 million ($867 million), compared to £215 million ($335 million) in the first half of last year.

The report warned, however that “investment return has fallen below the ‘unwinding of the discount’ applied to claims liabilities by £82 million ($128 million) in the first half.” Whether returns will remain there depends largely on the performance of the equity markets between now and the end of March when Equitas’ accounting period closes.

The report also noted exchange losses of £32 million ($50 million) during the period, compared to less than $2 million last year. Operating costs declined slightly to £46 million ($72 million).

“During the first half of this year, asbestos claims filings in the United States and the average amounts paid by some policyholders to resolve asbestos claims have continued to rise,” said the report. “Furthermore, additional companies are being targeted by asbestos claimants. Equitas, however, continues to be encouraged by the impact of the documentation requirements and the other asbestos claims management initiatives which have been adopted.”

Equitas procedures require that, before a claim is paid, it be documented sufficiently to establish an asbestos related condition directly traceable to one of its policyholders.

“A large number of the new asbestos claims have been filed by persons who have not been impaired by exposure to asbestos,” stated Chairman Hugh Stevenson. “We remain fully committed to ensuring that, except in special circumstances, Equitas reimburses only valid claims in which asbestos related injuries can be documented.”

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