The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against ProAssurance Corporation (“ProAssurance” or the “Company”), and certain of its senior executives. The Complaint alleges that Defendants made false and misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired ProAssurance common stock during the Class Period.
ProAssurance, incorporated in Delaware with its principal executive offices in Birmingham, Alabama, is one of the largest medical liability insurance providers in the United States. The Company’s most important division is its Specialty Property and Casualty segment (“Specialty P&C”), which has consistently accounted for at least 60% of the Company’s gross premiums written since 2015. This segment includes a healthcare professional liability line of business, primarily offered to healthcare providers.
Specifically, the Complaint alleges that Defendants misrepresented the Company’s underwriting and reserve standards and failed to disclose that it lacked an adequate underwriting process and risk management controls system necessary to set appropriate loss reserves in its Specialty P&C segment. As a result, ProAssurance failed to properly assess a large national healthcare account that experienced losses far exceeding the assumptions made when the account was underwritten, subjecting ProAssurance to substantial financial loss and materially heightened reserve charges. By April 2019, the Defendants were unquestionably aware of the negative trends within this segment, while maintaining in its public statements to investors that its reserves were “adequate,” “appropriate,” and “conservative.” On January 22, 2020, ProAssurance announced that because of a deteriorating loss experience related mainly to this large healthcare account, the Company was estimating a $37 million adverse development in its Specialty P&C loss reserves for the fourth quarter of 2019. In response, ProAssurance’s stock 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 its large national healthcare account was actually $51.5 million, which amounted to much more than the initial estimate of $37 million announced only a month prior. Then, on May 8, 2020, Defendants announced that this healthcare client would likely not renew its policy, and that as a result, ProAssurance would suffer over $100 million in losses from this single account. In response to these disclosures, ProAssurance’s stock price fell $4.38 per share, or 22%.
On September 11, 2020, the Court appointed Central Laborers’ Pension Fund and the Plymouth County Retirement System as Lead Plaintiff and Saxena White P.A. as Lead Counsel.