PHLY Philadelphia Consolidated Corp (MM)

BALA CYNWYD, Pa., Oct. 23 /PRNewswire-FirstCall/ -- Philadelphia Consolidated Holding Corp. (NASDAQ:PHLY) today reported net income for the quarter ended September 30, 2008 of $50.0 million ($0.68 diluted earnings per share and $0.71 basic earnings per share). This compares to $96.2 million of net income ($1.30 diluted earnings per share and $1.37 basic earnings per share) for the quarter ended September 30, 2007. After-tax net realized investment gains (losses) were $(11.6) million ($0.16 diluted loss per share) for the quarter ended September 30, 2008 compared to $1.8 million ($0.02 diluted earnings per share) for the quarter ended September 30, 2007. Gross written premiums for the quarter ended September 30, 2008 increased 9.8% to $553.9 million from $504.6 million for the quarter ended September 30, 2007, and the combined ratio for the quarter ended September 30, 2008 was 86.0% compared to 68.5% for the quarter ended September 30, 2007. The Company's book value per share as of September 30, 2008 increased to $22.38 from $21.47 as of December 31, 2007. Financial results for the quarter ended September 30, 2008 included: -- A $12.2 million pre-tax benefit ($7.9 million after-tax, or $0.11 diluted earnings per share) from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years' claim emergence. This benefit compares to a $39.5 million pre-tax benefit ($25.7 million after-tax, or $0.35 diluted earnings per share) recognized in the quarter ended September 30, 2007 from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years' claims emergence. -- $21.7 million of pre-tax losses ($14.1 million after-tax, or $0.19 diluted loss per share) resulting from losses attributable to Hurricane Ike, and $5.1 million of pre-tax expense ($3.3 million after-tax, or $0.04 diluted loss per share) resulting from accelerated and reinstatement ceded premium expense relating to Hurricane Ike. -- A $7.4 million pre-tax non-cash realized investment loss ($4.8 million after-tax, or $0.07 diluted loss per share) resulting from the other than temporary impairment evaluation for the Company's direct holdings of fixed maturity securities issued by Lehman Brothers Holdings Inc. and its subsidiaries ("Lehman"). -- An $11.4 million pre-tax non-cash realized investment loss ($7.4 million after-tax, or $0.10 diluted loss per share) resulting from other than temporary impairment evaluations related to the Company's equity holdings. Net income for the nine months ended September 30, 2008 was $165.6 million ($2.27 diluted earnings per share and $2.36 basic earnings per share). This compares to $256.6 million of net income ($3.46 diluted earnings per share and $3.65 basic earnings per share) for the nine months ended September 30, 2007. After-tax net realized investment gains (losses) were $(26.5) million ($0.36 diluted loss per share) for the nine months ended September 30, 2008 compared to $21.2 million ($0.29 diluted earnings per share) for the nine months ended September 30, 2007. Gross written premiums for the nine months ended September 30, 2008 increased 11.2% to $1,442.2 million from $1,297.3 million for the nine months ended September 30, 2007, and the combined ratio for the nine months ended September 30, 2008 was 84.5% compared to 73.3% for the nine months ended September 30, 2007. Financial results for the nine months ended September 30, 2008 included: -- A $36.6 million pre-tax benefit ($23.8 million after-tax, or $0.33 diluted earnings per share) from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years' claim emergence. This benefit compares to a $73.2 million pre-tax benefit ($47.6 million after-tax, or $0.64 diluted earnings per share) recognized in the nine months ended September 30, 2007 from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years' claims emergence. -- $20.6 million of pre-tax losses ($13.4 million after-tax, or $0.18 diluted loss per share) resulting from hail, tornado and wind losses which occurred in Minnesota, Nebraska, Kansas and Oklahoma during the period of May 22, 2008 through May 26, 2008, and which occurred in Illinois, Indiana, Kansas, Minnesota, Nebraska and Oklahoma during the period of May 29, 2008 through June 1, 2008. -- The Hurricane Ike losses and related accelerated and reinstatement ceded premium expense as referred to above. -- The non-cash realized investment loss resulting from the other than temporary impairment evaluation for Lehman as referred to above. -- A $34.7 million pre-tax non-cash realized investment loss ($22.6 million after-tax, or $0.31 diluted loss per share) resulting from other than temporary impairment evaluations related to the Company's equity holdings. James J. Maguire, Jr., CEO, said: "In the wake of turbulent economic times and disruption in the insurance industry, we continued to produce superior earnings through profitable underwriting and conservative investment practices. In the quarter, net written premiums grew by over 12%, with the month of September growing by over 20%. This premium growth was achieved while maintaining a very impressive 86% combined ratio in the quarter. Though competition persisted in most of our niches, we retained approximately 93% of our renewals and saw $19 million from new products. Customers and agents are more focused now than ever before on aligning themselves with a high quality, reputable insurer. After our recently announced merger with Tokio Marine Holdings closes, which I expect to occur in the fourth quarter of this year, PHLY will be better positioned than ever to capitalize on this market uncertainty and will further solidify our position as a premier U.S. insurer." 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. PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) As of September 30, December 31, 2008 2007 (Unaudited) ASSETS INVESTMENTS: FIXED MATURITIES AVAILABLE FOR SALE AT MARKET (AMORTIZED COST $2,863,583 AND $2,639,471) $2,778,992 $2,659,197 EQUITY SECURITIES AT MARKET (COST $357,918 AND $322,877) 352,053 356,026 TOTAL INVESTMENTS 3,131,045 3,015,223 CASH AND CASH EQUIVALENTS 152,050 106,342 ACCRUED INVESTMENT INCOME 31,249 24,964 PREMIUMS RECEIVABLE 433,958 378,217 PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES 376,263 280,110 DEFERRED INCOME TAXES 115,303 42,855 DEFERRED ACQUISITION COSTS 205,838 184,446 PROPERTY AND EQUIPMENT, NET 20,870 26,330 OTHER ASSETS 349,879 41,451 TOTAL ASSETS $4,816,455 $4,099,938 LIABILITIES AND SHAREHOLDERS' EQUITY POLICY LIABILITIES AND ACCRUALS: UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES $1,733,936 $1,431,933 UNEARNED PREMIUMS 962,472 847,485 TOTAL POLICY LIABILITIES AND ACCRUALS 2,696,408 2,279,418 PREMIUMS PAYABLE 97,196 97,674 OTHER LIABILITIES 416,079 175,373 TOTAL LIABILITIES 3,209,683 2,552,465 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: PREFERRED STOCK, $.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED, NONE ISSUED AND OUTSTANDING - - COMMON STOCK, NO PAR VALUE, 125,000,000 SHARES AUTHORIZED, 71,783,778 AND 72,087,287 SHARES ISSUED AND OUTSTANDING 412,184 423,379 NOTES RECEIVABLE FROM SHAREHOLDERS (21,487) (19,595) ACCUMULATED OTHER COMPREHENSIVE INCOME (58,796) 34,369 RETAINED EARNINGS 1,274,871 1,109,320 TOTAL SHAREHOLDERS' EQUITY 1,606,772 1,547,473 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,816,455 $4,099,938 PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 REVENUE: NET EARNED PREMIUMS $408,512 $359,149 $1,180,937 $1,015,182 NET INVESTMENT INCOME 33,273 30,199 97,577 85,694 NET REALIZED INVESTMENT GAIN (LOSS) (17,852) 2,817 (40,759) 32,638 OTHER INCOME 870 980 5,877 2,660 TOTAL REVENUE 424,803 393,145 1,243,632 1,136,174 LOSSES AND EXPENSES: LOSS AND LOSS ADJUSTMENT EXPENSES 330,726 146,389 820,218 479,142 NET REINSURANCE RECOVERIES (96,887) (1,584) (169,690) (35,243) NET LOSS AND LOSS ADJUSTMENT EXPENSES 233,839 144,805 650,528 443,899 ACQUISITION COSTS AND OTHER UNDERWRITING EXPENSES 117,640 101,252 347,275 299,902 OTHER OPERATING EXPENSES 4,314 2,992 12,279 9,128 TOTAL LOSSES AND EXPENSES 355,793 249,049 1,010,082 752,929 INCOME BEFORE INCOME TAXES 69,010 144,096 233,550 383,245 INCOME TAX EXPENSE (BENEFIT): CURRENT 24,931 53,198 90,281 146,528 DEFERRED (5,888) (5,346) (22,282) (19,908) TOTAL INCOME TAX EXPENSE 19,043 47,852 67,999 126,620 NET INCOME $49,967 $96,244 $165,551 $256,625 PER AVERAGE SHARE DATA: NET INCOME - BASIC $0.71 $1.37 $2.36 $3.65 NET INCOME - DILUTED $0.68 $1.30 $2.27 $3.46 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 69,996,068 70,457,765 70,084,248 70,323,834 WEIGHTED-AVERAGE SHARE EQUIVALENTS OUTSTANDING 3,602,386 3,599,654 2,884,758 3,856,902 WEIGHTED-AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING 73,598,454 74,057,419 72,969,006 74,180,736 DATASOURCE: Philadelphia Consolidated Holding Corp. CONTACT: Investor Relations: Joseph Barnholt, Assistant Vice President of Philadelphia Consolidated Holding Corp., +1-610-617-7626, Web site: http://www.phly.com/

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