St. Paul Travelers Cos. Inc. said Friday that it will increase its loss reserve allowances for uncollectible reinsurance by $1.625 billion, possibly leading to a second-quarter loss. This prompted Fitch Ratings and A.M. Best to downgrade the company, but Standard & Poor’s affirmed its ratings.
The St. Paul insurer, created in April by the merger of Travelers Property Casualty Corp with St. Paul Cos., said it has requested guidance from the Securities and Exchange Commission on how to account for these reserve valuation adjustments.
If the SEC says St. Paul Travelers must reflect these adjustments in its second-quarter income statement, the company said, it expects to report a loss of $275 million to $300 million. If regulators instead say the adjustments should be reflected in the opening balance sheet, it expects to report net income of $775 million to $800 million.
