BALA CYNWYD, Pa., Oct. 7 /PRNewswire-FirstCall/ -- Philadelphia Consolidated Holding Corp. today reported its initial estimate of losses attributable to Hurricane Ike. Although claims information is preliminary, the Company estimates its net pre-tax losses to be approximately $22.0 million. Such net pre-tax losses may change due to the preliminary nature of the information currently available. In addition, as a result of utilizing certain catastrophe reinsurance coverage in connection with this hurricane event, the Company will also recognize approximately:
-- $1.2 million, pre-tax, of net reinstatement reinsurance premium expense; and
-- $4.1 million, pre-tax, of accelerated reinsurance premium expense which the Company would have otherwise been required to expense over the remaining reinsurance contract period.
The estimated reduction of third quarter net income as a result of Hurricane Ike is approximately $17.6 million.
In connection with recent developments in the financial markets, the Company also commented on its investment exposure to several specific entities. The Company has current direct holdings of fixed maturity securities issued by Lehman Brothers Holdings Inc. and its subsidiaries ("Lehman") of $8.5 million (par amount) within its fixed maturity investment portfolio. The Company intends to record a $7.4 million, pre-tax, other-than-temporary impairment loss on this Lehman investment in the third quarter. The Company has no investments in fixed maturity securities issued by American International Group, Inc. ("AIG") or Washington Mutual, Inc. ("WaMu"). The Company has no direct holdings of preferred or common shares issued by Lehman Brothers, The Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). During the third quarter, the Company sold all of its common stock investments in AIG and WaMu, realizing pre-tax losses of $6.1 million and $1.4 million, respectively.
Forward-Looking Information
This release may contain forward-looking statements that are based on management's estimates, assumptions and projections. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development, results of the Company's business, and the other matters referred to above include, but are not limited to: (i) changes in the business environment in which the Company operates, including inflation and interest rates; (ii) changes in taxes, governmental laws, and regulations; (iii) competitive product and pricing activity; (iv) difficulties of managing growth profitably; (v) claims development and the adequacy of the Company's liability for unpaid loss and loss adjustment expenses; (vi) severity of natural disasters and other catastrophe losses; (vii) adequacy of reinsurance coverage which may be obtained by the Company; (viii) ability and willingness of the Company's reinsurers to pay; (ix) future terrorist attacks; and (x) the outcome of the Securities and Exchange Commission's industry-wide investigation relating to the use of non-traditional insurance products, including finite risk reinsurance arrangements. The Company does not intend to publicly update any forward looking statement, except as may be required by law.
In operation since 1962, PHLY designs, markets, and underwrites commercial property/casualty and professional liability insurance products incorporating value added coverages and services for select industries. The Company, whose commercial lines insurance subsidiaries are rated A+ (Superior) by A.M. Best Company and A1 for insurance financial strength by Moody's Investors Service, is nationally recognized as a member of Ward's Top 50, Forbes' Platinum 400 list of America's Best Big Companies and Forbes' 100 Best Mid-Cap Stocks in America. The organization has 47 offices strategically located across the United States to provide superior local service.
