The Complaint charges PXRE and certain of its present and former officers with violations of the Securities Exchange Act of 1934. PXRE is a worldwide provider of catastrophe reinsurance products and services to both primary insurers and reinsurers. Since 1987, they have specialized in offering catastrophe and risk excess reinsurance. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company concealed from investors the full impact on its business of Hurricanes Katrina, Rita, and Wilma ("2005 Hurricanes"); (2) that, in fact, the Company's cost of the 2005 Hurricanes had doubled to an estimated $758 million to $788 million; (3) that the magnitude of the loss would cause the Company to lose key financial-strength and credit ratings from A.M. Best, an influential industry-rating agency (4) that the Company concealed the losses in order to complete a $114 million secondary offering and raise more than $350 million from an offering of perpetual preferred shares; and (5) that as a consequence of the foregoing, the Company's statements with respect to its loss estimates for the 2005 Hurricane season lacked in all reasonable basis.
The complaint further alleges that on or around February 16, 2006, after the close of the market, PXRE shocked investors when it announced that it would be increasing its estimates of the net pre-tax impact of Hurricanes Katrina, Rita and Wilma by an amount between $281 million to $311 million for the year ended December 31, 2005 compared to the high end of their prior announced estimates. Later that same day, February 16, 2006, A.M. Best announced that it had downgraded the financial strength rating of PXRE to B++ (Very Good) from A- (Excellent). News of this sent shares of PXRE spiraling downward on February 17, 2006. By the end of the day, shares of PXRE had fallen $7.85 per share, or 65.94 percent, on high trading volume, to close at $4.05 per share.
On May 15, 2006, the plaintiff filed an Amended Class Action Complaint. On March 20, 2007, Judge Kenneth M. Karas signed the Opinion and Order # 94510 consolidating all related actions under In re PXRE Group, Ltd. Securities Litigation, case number 06cv3410. Chad Condra was appointed lead plaintiff and Pomerantz Haudek Block Grossman & Gross LLP was appointed lead counsel. On June 15, 2007, a Consolidated Amended Class Action Complaint was filed. The defendants responded by filing a motion to dismiss. On March 5, 2009, Judge Richard J. Sullivan signed the Opinion and Order # 97215 denying the plaintiff’s pending motion to amend the complaint. Judge Sullivan also granted the defendants’ motion to dismiss with prejudice.
On April 3, 2009, a Notice of Appeal was filed with the United States Court of Appeals for the Second Circuit from the final judgment entered in this action on the 5th day of March 2009.
According to an article dated December 22, 2009, the U.S. Court of Appeals for the Second Circuit has upheld the dismissal of a securities fraud class action against executives of PXRE Group Ltd., ruling that the lower court properly found that the reinsurance company was not trying to deceive its investors when it underestimated the company's losses stemming from damage caused by Hurricane Katrina.