NEW YORK (CBS. MW) - Shares of insurer Travelers Property Casualty rose more than 3 percent on Tuesday after the company boosted its asbestos reserve but avoided taking too big a hit to its credit ratings. Now one of its rivals, Bermuda-based ACE, is expected to add to reserves.

Travelers said it's boosting its asbestos reserves to $3.4 billion, after reinsurance recoverables, from $950 million on September 30, 2002.

The move will result in a $1.3 billion, after-tax fourth-quarter charge "This reserve strengthening 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 I. Lipp, chairman and chief executive officer. After the move, Standard & Poor's rating agency quickly affirmed its "A-" counterparty credit and senior debt ratings on the Hartford, Connecticut-based company, but cautioned that Travelers' credit outlook remains negative.

"The negative outlook reflects Travelers' moderately below-average statutory capital strength for the rating and reduced financial flexibility. Nevertheless, the insurer's fundamental market positions and growth opportunities are expected to remain very strong," the rating agency said.

S&P said it now expects Travelers rivals Hartford Financial (HIG: news, chart, profile) and ACE Ltd. (ACE: news, chart, profile) to follow by adding to reserves. Those stocks are down 7 cents at $48.28 and 92 cents at $30.08, respectively.

Rating agency Fitch affirmed its financial strength rating for all the companies in the Travelers Property Casualty Group, but downgraded the senior debt and long-term issuer rating for Travelers Insurance Group Holdings.

"Fitch believes that this recent strengthening of asbestos reserves will place Travelers P&C significantly `ahead-of-the-curve' in regards to asbestos reserve adequacy relative to industry norms and that nonasbestos related loss reserves are generally adequate," the firm said. For the fourth quarter of 2002, including the charge, Travelers expects a net loss of $793 million, or 79 cents per share.

For the full year 2002, Travelers expects a net loss, including the fourth-quarter charge, of about $27 million, or 3 cents per share. Travelers shares (TAPA: news, chart, profile) closed with a 59 cent, or 3.7 percent, gain at $16.43 Tuesday.

The Amex Securities Broker/Dealer Index and the Philadelphia Bank Sector Index both added 1 percent on Tuesday.

Shares of Citigroup, the nation's largest bank, led industry gainers, adding 89 cents, or 2.4 percent to $37.93.while J.P. Morgan shares rose 31 cents, or 1.1 percent, to $27.59. That's the highest Citigroup closing since December 2. In the last six weeks Citi has been meeting technical resistance at $38 per share, but some observers expect a breakout from that level if the company posts solid earnings when it reports on January 21.

"From a technical perspective, the equity has been range-bound since mid-October with support at the 34 level," according to Bernie Schaeffer's Schaeffer's Option Activity Watch.

But, he added, "Wall Street remains smitten with the banking issue, as 15 of the 19 analysts following the company rate it a "buy" or better, according to Zacks. With investors standing behind it, Citi will have its chance to prove itself fundamentally next week." State Street was the top decliner on the Philly Bank Index, slipping 37 cents, or 0.9 percent, to $40.10. Charles Schwab was one of the only brokerage stocks rising on Tuesday, as it added 48 cents, or 4 percent, to $12.38. Morgan Stanley and Merrill Lynch added 0.5 percent and 0.1 percent, respectively.