Aetna to Add $750 Million to Reserves for Environmental Claims

Aetna Life & Casualty Co. said Wednesday it will add $750 million to its existing environmental reserves to deal with potentially huge pollution claims.

The insurer said it will take an after-tax charge of $488 million, or $4.31 a share, against second-quarter 1995 earnings, due out on July 28. Aetna also said it intends to replenish about $450 million of capital in its property-casualty businesses by the end of 1995.

Aetna faces potentially huge pollution claims from policies dating as far back as the 1950s. They mostly involve claims by property owners against companies that generate toxic waste.

Chairman Ronald E. Compton said the decision to add to its environmental reserves, which would nearly triple them, represents Aetna’s best estimate of its “ultimate environmental-related liability, based on currently known facts, existing law, technology and reasonable assumptions.”

“We now have substantial protection against environmental liability and we can focus our energies on improving the profitability of our businesses,” Compton added.

Aetna said it intends to purchase reinsurance to provide more protection against environmental claims. The company has been studying its environmental liability with the help of an outside actuarial firm.

The move, which had been expected, should help make Aetna more competitive in the eyes of agents, brokers and insurance buyers by bolstering its financial stability, analysts have said.

“They’re establishing the reserves at the high end of what other companies have done,” said analyst Gary Ransom of Conning & Co., a Hartford-based firm that follows the insurance industry.

The move will exert pressure on companies that have taken no such measures, he said.

Aetna’s property-casualty business represented nearly 31% of 1994 revenue, but only about 12% of net income. It recently eliminated 4,000 jobs, about half of them in property-casualty operations.