Travelers Property Casualty Corp. announced that it is strengthening certain reserves at Gulf Insurance, its majority owned subsidiary, resulting in a first quarter 2003 charge to Travelers of approximately $77 million, or $0.08 per share, after reinsurance, tax and minority interest. This reserve strengthening primarily relates to a line of business that insured residual values of leased vehicles and that was placed in runoff in late 2001. The price of used vehicles declined significantly during the first two months of 2003 and the reserve increase assumes further reductions during the remainder of the year. This trend is consistent with recent reductions in the Manheim Used Vehicle Value Index.
Travelers also announced that it has experienced favorable prior year reserve development in its Commercial and Personal Lines businesses, primarily related to property coverages. The first quarter 2003 benefit of this favorable development is estimated to be approximately $80 million, or $0.08 per share, net of reinsurance and tax.
These actions are in addition to a previously disclosed settlement at Gulf related to the resolution of a coverage dispute for a residual value policy that resulted in a first quarter charge to Travelers of approximately $68 million, or $0.07 per share, after reinsurance, tax and minority interest.
While the combination of these actions will reduce first quarter 2003 net and operating income, Travelers reaffirmed that full year net and operating income are expected to be in the range of $1.7 billion to $1.8 billion.
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