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MORRISTOWN, N.J.--Equitas Ltd. will pay $472 million to Honeywell International Inc. in a policy buyback, settling all of Honeywell's asbestos and other claims against Lloyd's of London syndicates reinsured by Equitas, the two sides announced.
Equitas was to pay the $472 million in cash Tuesday, resolving Honeywell claims for asbestos liabilities of its former North American Refractories Co. unit and its Bendix automotive brake business, which Honeywell agreed in January to sell to Federal-Mogul Corp.
"This settlement is another significant step in Honeywell's comprehensive strategy to resolve all issues related to the NARCO and Bendix asbestos cases and is consistent with the assumptions on which our existing reserves are based," Peter Kreindler, Honeywell's general counsel, said in a statement.
NARCO filed for Chapter 11 bankruptcy last year and is pursuing a plan to resolve current and future asbestos claims through a bankruptcy trust fund for claimants. The plan calls for Honeywell to pay current claims over a four-year period and would cap the company's annual payments to the trust to fund future claims. Honeywell took a $900 million aftertax charge in last year's fourth quarter to fund the proposed NARCO trust.
Southfield, Mich.-based Federal-Mogul filed for Chapter 11 reorganization in 2001 but plans to set up a trust for Bendix asbestos claimants as part of its deal to acquire the company. Honeywell would contribute the proceeds of its Bendix-related insurance policies to the trust.
Honeywell would be shielded from future asbestos claims under the NARCO and Federal-Mogul plans, which still must be confirmed by bankruptcy courts.
A Honeywell spokesman declined to say how much of the Equitas settlement will be allocated to the NARCO and Bendix asbestos trusts.
In its 2002 10-K filing with the Securities and Exchange Commission last month, Honeywell reported having $1.8 billion in insurance limits available to cover asbestos claims, about $900 million of which was recoverable from Equitas and other London market insurers.
Tuesday's settlement involves only Equitas--the runoff reinsurer for Lloyd's pre-1993 long-tail liabilities--and does not include other London market companies.
An Equitas spokesman declined comment on whether the reinsurer had reserved more than $472 million for Honeywell claims, saying the information could hamper future policy buyback negotiations.