updated 5/10/2010 2:29:51 PM ET 2010-05-10T18:29:51

Tower Group Inc. said Monday its first-quarter profit slipped, and the property and casualty insurer reduced its full-year earnings estimate, partly because of higher catastrophe losses in the latest quarter.

The latest quarter's profit and Tower's revised expectations both fell short of Wall Street estimates, and shares of Tower Group fell about 2 percent in afternoon trading.

New York-based Tower reported net income of nearly $17.5 million, or 38 cents per share, for the three months ended March 31. That was down nearly 3 percent from a profit of nearly $18 million, or 53 cents per share, in last year's first quarter.

Excluding one-time items, Tower's operating earnings for the latest quarter were nearly $17.8 million, or 39 cents per share. Analysts surveyed by Thomson Reuters had expected operating earnings of nearly 49 cents per share, on average.

After-tax catastrophe losses from storms amounted to $12 million, or 27 cents per share. Those losses added 6.5 points to the company's combined first-quarter loss ratio of 63.2 percent, up from 53.7 percent in the year-ago period, when Tower had no catastrophe losses.

Those losses in the latest quarter were the highest in the company's 20-year history, said Michael Lee, president and CEO. The catastrophes included storms in the northeastern United States.

Catastrophe losses were partly offset by a 34 percent increase in gross premiums written and produced, to $283.9 million. Newly acquired companies contributed some of that gain.

Tower cut its earnings expectations, citing the catastrophe losses and plans to complete an acquisition by the close of the second quarter. Tower now expects full-year operating earnings of $2.60 to $2.70 per share, down from earlier guidance of $3 to $3.20 per share.

Analysts had expected a full-year profit of nearly $2.83 per share, on average.

Shares of Tower fell 48 cents to $21.87 in afternoon trading.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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