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Member, Beacon International Group, Ltd.
ST. PAUL, Minn.--In an effort to increase profitability, The St. Paul Cos. Inc. will exit the medical malpractice business, certain reinsurance lines and countries where the company is not likely to be competitive.
The St. Paul, Minn.-based insurer also plans to reduce annual expenses by $50 million through staff reductions and expense controls. The St. Paul, the country's largest medical malpractice liability insurer, will leave the global medical malpractice market by not renewing expiring policies and will increase medical malpractice reserves by $600 million. Including the reserve increase, St. Paul expects its medical malpractice business to produce a $940 million underwriting loss this year.
Meanwhile, the company's St. Paul Re unit will no longer write aviation reinsurance, bond and credit reinsurance or offer financial risk and capital markets insurance products. It will also "substantially reduce" the amount of North American business it writes in London, the company said. St. Paul's Lloyd's operation will exit most of its casualty insurance and reinsurance business, U.S. surplus lines and certain nonmarine reinsurance lines. It will continue to underwrite aviation, marine, financial and professional services, property insurance, kidnap and ransom, accident and health, creditor and other personal specialty products.
Including the added medical malpractice reserves, St. Paul will record an estimated fourth-quarter pretax charge of $900 million. That charge also includes $75 million in increased reserves for other insurance lines, an added $75 million in reserves associated with the Sept. 11 terrorist attack, a $75 million writedown of goodwill associated with the exited lines and an approximately $75 million restructuring charge stemming primarily from employee severance.