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Hardie asbestos liability may fall

May 29, 2007 | Ean Higgins | The Australian

JAMES Hardie Industries' exposure to claims from future asbestos victims may be considerably less than earlier estimated, with an unexpected decline in reported cases of the cancer mesothelioma.

The trend announced by Hardie yesterday, based on a new actuarial report, runs counter to recent projections by researchers that point to an expected increase in mesothelioma for Australia as a whole.

The Dutch-registered global building products company yesterday announced its annual results for the year to March, and also published its latest actuarial assessment by KPMG of expected asbestos disease claims against the company.

After an epic struggle, Hardie in 2005 bowed to pressure from unions, asbestos victim groups and governments and agreed to make up a $1 billion plus shortfall in its provisions for the thousands of Australians who will die or be crippled from the asbestos products it manufactured up until 1987.

This year's KPMG report puts the "central estimate" of claims Hardie will face over the next 40 years - on an inflation-adjusted or "discounted" basis - at $1.4 billion, compared to $1.6 billion in its last estimate in September.

On an undiscounted basis, the central estimate has come down to $2.8 billion, compared with $3.2billion in KPMG's September estimate.

While a number of factors contributed to the revised assessment, a key element was a decline in the number of cases of mesothelioma, an aggressive cancer of the lining of the lungs and abdomen.

Mesothelioma, caused only by asbestos, kills most of its victims within about a year of diagnosis, but usually takes 30 to 40 years to appear.

Health researchers and actuaries have engaged in considerable debate as to when the number of new mesothelioma cases will peak, with most predicting a continuing rise for some years before a decline.

But KPMG said there had been only 202 mesothelioma claims against Hardie's former asbestos subsidiaries in the year to March, compared to 212 claims in the corresponding period in 2005-6 and 263 claims in 2004-5.

"However, it is not clear what the drivers are that have given rise to this somewhat unexpected trend," KPMG said.

The actuaries take note of a recent study, known as the Clements paper, which says mesothelioma claims in Australia will not peak until 2017.

But KPMG says the Hardie subsidiaries cover a different grouping of victims, and sticks with its prediction of mesothelioma claims against Hardie peaking in 2010-11.

Mesothelioma claims produce the biggest settlements, and KPMG noted there were five large settlements of more than $1 million against Hardie in 2006-7.

There was also a new claim from the US, to which Hardie exported asbestos products from Australia.