Benzinga | Sep 23, 2020 04:20PM EDT

Edison Int'l.'s Southern California Edison Reports Settlement Deal With Holders Of Insurance Subrogation Claims In Pending Litigation Related To 2017 Thomas, Koenigstein Fires, 2018 Montecito Mudslides

Southern California Edison has reached a settlement agreement with all the holders of insurance subrogation claims in the pending litigation arising from the 2017 Thomas and Koenigstein fires and the 2018 Montecito Mudslides (TKM). No admission of wrongdoing or liability was made in reaching this settlement. In addition, SCE continues to make progress in reaching settlements with individual plaintiffs in litigation arising from these events and the 2018 Woolsey Fire (collectively, the 2017/2018 Wildfire/Mudslide Events).

"We are making significant progress toward resolving wildfire-related litigation," said Pedro J. Pizarro, president and CEO of Edison International, parent company of SCE. "The settlement announced today resolves all the subrogation claims in the pending 2017 Thomas and Koenigstein fires and January 2018 Montecito Mudslides litigation. In addition, while other claims and potential claims related to the 2017/2018 Wildfire/Mudslide Events remain, SCE has reached settlements with several hundred individual plaintiffs in litigation arising from these events. The company continues to explore reasonable settlement opportunities with other parties."

Under the subrogation claims settlement, subrogation plaintiffs will receive $1.16 billion for claims based on payments they have already made to individual and business policyholders associated with the Thomas and Koenigstein fires and Montecito Mudslides. SCE will pay additional amounts for claims arising from future payments that may be made to policyholders prior to July 15, 2023, up to an agreed-upon cap.

Previously, last November, SCE and Edison International reached separate settlements with 23 public entities impacted by the 2017/2018 Wildfire/Mudslide Events. With this current subrogation claims settlement, increased settlement activity with individual plaintiffs and currently available information, SCE is now establishing a best estimate of total expected losses for the 2017/2018 Wildfire/Mudslide Events litigation of $6.2 billion (an increase of $1.3 billion from the prior estimate) and will record an incremental net charge to earnings of $878 million after tax. SCE's best estimate of expected remaining losses is $4.6 billion.

SCE intends to seek reimbursement for a large portion of the settlement announced today from the approximately $843 million of its remaining wildfire insurance for the Thomas and Koenigstein fires and Montecito Mudslides. Timing differences between payments to the subrogation plaintiffs and reimbursement by insurance will be financed with SCE short-term debt supported by SCE's $4.5 billion of existing credit facilities.

The following table presents changes in expected insurance recoveries associated with the estimated losses for the 2017/2018 Wildfire/Mudslide Events since June 30, 2020:

($ in millions) TKM Woolsey Total

Total insurance for 2017/2018 Wildfire/Mudslide Events 1,000 1,000 2,000

Recovered from insurance carriers through June 30, 2020 (157 ) (206 ) (363 )

Balance at June 30, 2020 843 794 1,637

Expected insurance recoveries for the TKM settlement (843 ) n/a (843 )

Expected remaining balance after reimbursement ? 794 794

To enable SCE to debt finance these incremental claims payments and maintain investment grade credit ratings, Edison International anticipates issuing approximately $1 billion of equity to invest in SCE. The timing of this financing will be dependent upon future settlements and claims payments that exceed insurance, and Edison International will provide an update on the fourth quarter 2020 earnings call.

Reaffirm 2020 Earnings Guidance

Additionally, Edison International reaffirms its previously provided 2020 earnings guidance range of $4.37 to $4.62 per share. The net charge to earnings associated with establishing a best estimate of expected losses will be treated as a noncore item. Edison International uses core earnings, which is a non-GAAP financial measure. See discussion of Use of Non-GAAP Financial Measures at the end of this release.