Philadelphia Consolidated (PHLY) Estimates Loss From Hurricane Ike; Comments on Exposure to Lehman and AIG
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Philadelphia Consolidated Holding Corp. (Nasdaq: PHLY) 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. 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 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 AIG or Washington Mutual, Inc. 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.[SM]
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