St. Paul Travelers faces lawsuits over reserve charge

The newly merged St. Paul Travelers is facing a slew of shareholder lawsuits following its announcement that it would boost reserves by more than $1.6 billion.The reserve charge caused the company to post a second quarter loss of US$275 million. And the company’s stock price has fallen from about almost US$41 at the time of the merger in April to just over $34 today.The suits have been filed in Minnesota, and allege the company’s registration statement “was materially false or misleading”. One complaint, filed by law firm Wolf Popper LLP, alleges the company failed to disclose the difference in accounting methods between St. Paul and Travelers, which led to much of the reserve charge when the two companies merged. It also accuses St. Paul of failing to disclose its exposure to other negative factors such as reinsurance recoverable issues, which led to US$466 million of the reserve addition.Wolf Popper complaint includes holders of class A or B Travelers stock who saw their stocks transferred into St. Paul stock as a result of the merger.In other news, St. Paul Travelers it has received approval for settlements related to Travelers’ asbestos claims exposure. The settlement includes US$445 million for claimants, plus up to US$57.5 million in legal fees.