The nation’s fourth largest business insurer has seen its shares take their biggest drop in over a decade after the company noted storm losses and medical-malpractice claims would sharply impact earnings.
Shares of St. Paul Companies have dropped $6.10 to $42.82, after reaching an almost three-month low of $42.40. The St. Paul, Minnesota-based insurer’s drop is the largest since Oct. 19, 1987, putting year-to-date declines at 21 percent.
St. Paul noted that losses as a result of storms, mainly Tropical Storm Allison, will likely result in $70 million, or 20 cents a share in the quarter. Greater-than-expected claims at its medical-malpractice liability unit will also hurt results. The company has added $100 million, or 29 cents a share, in pretax reserves to back losses.
St. Paul was figured to earn 76 cents a share in the second quarter, according to the average of analysts surveyed by First Call/Thomson Financial.
Despite the fact St. Paul is not the only insurer to report storm losses, analysts and investors noted the company’s flagship medical malpractice business is also being impacted by a turn upward in litigation and a problem in gaining approval to increase prices.
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