US insurer The St Paul Companies has announced that its second-quarter earnings will be hit by its exposure to bonds issued by a bankrupt policyholder.

The bond in question was issued on behalf of an unnamed health benefits firm.

The commercial insurer revealed its second-quarter figures would be reduced by $56m (£34m) as a result of the bond's failure.

Despite this development, chairman and chief executive Jay Fishman said: "Our business remains solidly on track, and we have not changed our profitability objective for 2003."