US energy firm Halliburton has revealed a $1.1bn (£607m) charge to cover claims from people suffering from asbestos-related diseases. Halliburton, formerly headed by US vice-president Dick Cheney, yesterday revealed a $947m net loss in the fourth quarter of the year, despite a large increase in revenues from its controversial contracts in Iraq.
It faces more than 300,000 claims from people who have been affected by asbestos in former Halliburton products. Asbestos is a carcinogen when in dust form and no longer used in building materials.
Halliburton yesterday agreed with its former insurer, Equitas, that Halliburton could receive $575m to pay the asbestos claimants. It has a total of $2bn due from insurance firms, but has calculated that it has $4bn of liabilities, significantly more than previously revealed, and will have to pay the difference. It is close to settling with asbestos claimants for up to $2.7bn.
Mr Cheney was Halliburton chief executive before he joined George Bush's election campaign in 2000. The choice of the company last March to help to reconstruct Iraq drew accusations of cronyism, as the contract was not put out to tender. Yesterday the company revealed that the Iraq contracts had brought in $2.2bn of revenue in the fourth quarter of the year, with profits of $44m. Total fourth-quarter revenues rose 63% to $5.5bn.
Representatives of the asbestosis victims welcomed Halliburton's settlement with Equitas and the recognition of the asbestos liabilities in its accounts as evidence that it is close to paying up. It now looks unlikely that legislation will be passed in Congress that can scupper this settlement, despite attempts to do so last year.
"This is a favourable resolution," said Jon Gelman, a lawyer representing asbestosis victims. "Halliburton has realised that they can't circumvent litigation by trying to pass legislation through Congress to insulate them. They understand they will have to pay claimants."
Equitas is the organisation sorting out claims against the previous incarnation of insurance market Lloyd's of London, which had financial difficulties in the mid-1990s. It has settled £14bn of claims so far.
Yesterday the new Lloyd's of London lost its finance director, Andrew Moss, to life assurance firm Aviva. He held Lloyd's together after the September 11 attacks, when insurers faced large claims. He will receive a salary of £440,000 per year, and £540,000 worth of Aviva shares to compensate him for loss of bonuses at Lloyd's.
Friday January 30, 2004