The insurer spun off last year by Citigroup Inc. had a net loss of $793 million, or 79 cents a share, in the fourth quarter, said spokesman Keith Anderson.

Travelers followed rivals such as St. Paul Cos. and Chubb Corp. in setting aside more to pay asbestos claims. Asbestos litigation has cost insurers more than $100 billion and bankrupted more than 60 U.S. companies. Congress is considering legislation to limit the liability of those charged with exposing workers to the cancer-causing substance.

``The number was bigger than expected but the silver lining was they gave us a lot of detailed analysis,'' said Thomas Davis, an analyst at Loomis Sayles & Co., which manages about $70 billion and owns 116,000 Travelers B shares. ``They didn't have to raise equity and the hit to the balance sheet is going to be fixed within six months through the earnings power of the company.''

Raising Forecast

For the year, Travelers' net loss was $27 million, or 3 cents a share. The company said its 2003 income from operations would exceed forecasts.

Travelers said it will earn between $1.7 billion and $1.8 billion, or $1.69 and $1.79 a share. It was forecast to have operating earnings of $1.62 a share, according to a survey by Thomson First Call.

Travelers' targeted return on equity of between 16.7 percent and 17.6 percent is better than most other insurers, which averages about 14 percent, Davis said.

Its B shares rose 82 cents to $16.70 at 10:59 a.m. in composite trading on the New York Stock Exchange.

Moody's Investors Service cut Travelers senior unsecured debt rating to A2 from A1 after the announcement, citing the charge. The rating company also cut the insurer's financial- strength rating to Aa3 from Aa2.

`Right Step'

Some investors who participated in Travelers IPO weren't surprised by the size of the charge, they said. They expected an increase in asbestos reserves and Citigroup provided an $800 million reinsurance policy to assuage investor concern.

``The company is taking the right step to strengthen reserves by such a significant amount,'' said Ania Aldrich, an analyst at Cambiar Investors, which bought the shares in the offering. ``Operationally, the company is doing very well and just increased its guidance for 2003.''

The addition to reserves ``reflects a conservative view of trends that have become clearer over the last few quarters and our estimate of the projected ultimate cost of our asbestos liabilities,'' said Robert Lipp, Travelers chairman and chief executive officer, in a statement.

Asbestos is a fibrous material used in the 1960s and 1970s for fireproofing. It can cause respiratory illnesses such as asbestosis and in some cases life-threatening illnesses including lung cancer. Such illnesses may not develop for 30 or 40 years, medical experts say.

Halliburton Co., the world's second-largest provider of oilfield services, is negotiating a $4 billion settlement of asbestos claims that will be in part paid for by insurance. Other companies negotiating settlements include PPG Industries, for $2.7 billion, and ABB Ltd., which offered $1.1 billion.

Travelers' asbestos reserve will grow to $3.4 billion from $950 million, including $555 million remaining in the reinsurance policy from Citigroup, the company said. Increasing the reserve resulted in an after-tax charge of $1.3 billion.

St. Paul, the fourth-largest U.S. business insurer, added $900 million to reserves last year. Chubb added $600 million.