According to the Complaint, ProAssurance Corporation is one of the largest medical liability insurance providers in the United States.
The Complaint alleges that during the Class Period, Defendants misrepresented the Company’s underwriting and reserve standards, and failed to adequately reserve for losses. Specifically, the Complaint alleges Defendants made false and/or misleading statements and/or failed to disclose that: (i) ProAssurance lacked adequate underwriting process and risk management controls necessary to set appropriate loss reserves in its Specialty P&C segment; (ii) ProAssurance failed to properly assess a large national healthcare account that experienced losses far exceeding the assumptions made when the account was underwritten; and (iii) as a result, ProAssurance was subject to a materially heightened risk of financial loss and reserve charges.
On January 22, 2020, ProAssurance announced that because of a deteriorating loss experience related primarily to one large healthcare account underwritten in 2016, the Company was estimating a $37 million adverse development in its Specialty P&C loss reserves for the fourth quarter of 2019. Additionally, the Company stated that since mid-2019 it had been executing a “comprehensive underwriting strategy in response to emerging trends and changing conditions in healthcare professional liability.” In response to these disclosures, ProAssurance’s stock price fell $4.18 per share, or 11%, to close at $33.40 per share on January 23, 2020.
On February 20, 2020, ProAssurance announced its 2019 fourth quarter and full year results. The Company revealed that the adverse development from this one large national healthcare account was actually $51.5 million, much larger than the initial estimate of $37 million only a month prior.
Then, on May 8, 2020, ProAssurance announced that the large healthcare client would likely not renew its policy and instead would likely exercise an option for tail coverage that would result in an additional $50 million in losses in the second quarter of 2020. This loss, when combined with the $51.5 adverse development, meant that the Company would suffer over $100 million in losses from a single account.
In response to these disclosures, ProAssurance’s stock price fell $4.38 per share, or 22%, to close at $15.95 per share on May 8, 2020.
On September 11, 2020, the Court issued an Order appointing Lead Plaintiff and Counsel.