Philadelphia Consolidated Holding (PHLY) 8-K Results of Operations and Financial Condition

Exhibit 99.1

PHILADELPHIA CONSOLIDATED HOLDING CORP.
THIRD QUARTER RESULTS
SEPTEMBER 30, 2004

OCTOBER 21, 2004 PRESS RELEASE

Bala Cynwyd, PA – Philadelphia Consolidated Holding Corp. (PHLY-NASDAQ) today reported a net loss for the third quarter ended September 30, 2004 of $2.1 million ($0.09 diluted and $0.09 basic loss per share) vs. net income of $23.6 million ($1.04 diluted and $1.08 basic earnings per share) for the same period in 2003. The 2004 third quarter results reflect:

• $38.4 million pretax ($25.0 million after tax, or $1.07 diluted loss per share) of hurricane catastrophe losses as a result of Hurricanes Charley, Frances, Ivan and Jeanne;

• $27.7 million pretax ($18.0 million after tax, or $0.77 diluted loss per share) accelerated reinsurance premium expense due to the utilization of certain catastrophe reinsurance coverages as a result of the above mentioned multiple hurricane events;

• A decrease in the 2004 accident year ultimate loss ratio to recognize better than anticipated pricing and loss trends. This decrease in the 2004 accident year loss ratio also resulted in a release of $27.2 million of 2004 accident year loss reserves. The ultimate loss ratios for certain prior accident years were increased resulting in a $25.1 million increase in loss reserves;

• $0.3 million pretax ($0.2 million after tax, or $0.01 diluted earnings per share) in realized investment gains.

For the quarter ended September 30, 2004, gross written premiums increased by 28.3% to $367.4 million vs. $286.4 million in the third quarter of 2003. The combined ratio for the quarter ended September 30, 2004 was 108.9%. The hurricane losses and associated accelerated catastrophe reinsurance premium expense contributed 31.8 percentage points to the combined ratio for the quarter ended September 30, 2004.

Net income for the nine months ended September 30, 2004 was $51.3 million ($2.21 diluted and $2.32 basic earnings per share) versus $41.7 million ($1.85 diluted and $1.90 basic earnings per share) for the same period in 2003. After-tax realized investment gains were $0.6 million ($0.03

Press Release
October 21, 2004
Page 2

diluted earnings per share) versus $0.9 million ($0.04 diluted loss per share) of after-tax realized investment losses for the same period in 2003.

James J. Maguire, Jr. CEO said: “Our thoughts and prayers are with those whose lives were affected by the unprecedented hurricane activity. I am proud of the efforts being put forth by our employees to quickly and efficiently resolve policyholder claims. Although the hurricane activity adversely impacted our quarter, I am otherwise pleased with the results of our core operations.

Renewal retention levels for our commercial and specialty segments remained high in the mid 90 percent. Price increases have trended downward from the second quarter, but we saw average increases approximating 3%. I remain confident about our business prospects for the balance of 2004.”

The Company will hold its quarterly conference call to discuss third quarter 2004 results today at 3:00 PM EDST. The call is being webcast and may be accessed at the Company’s web site at www.phly.com. The dial-in phone number for the conference call is (800) 915-4836.

A replay of the webcast will be archived through November 12, 2004 at the same URL.

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 our 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 our reinsurers to pay; and (ix) future terrorist attacks.

Philadelphia Insurance Companies, rated “A+” (Superior) by A.M. Best Company, is a specialty niche Company which markets and underwrites property and casualty insurance products through 36 proprietary underwriting offices across the U.S. of A. For more information about our Company or to review our 2003 annual report, visit our web site at www.phly.com.

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

	As of
	September 30,			December 31,
	2004			2003
	(Unaudited)			(Restated)
ASSETS
INVESTMENTS:
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET (AMORTIZED COST $1,234,040 AND $1,066,523)	$	1,251,297		$	1,081,694
EQUITY SECURITIES AT MARKET (COST $114,382 AND $79,813)		121,520			90,358
TOTAL INVESTMENTS		1,372,817			1,172,052
CASH AND CASH EQUIVALENTS		116,175			73,942
ACCRUED INVESTMENT INCOME		13,496			11,008
PREMIUMS RECEIVABLE		236,842			179,509
PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES		793,197			292,157
DEFERRED INCOME TAXES		23,682			18,147
DEFERRED ACQUISITION COSTS		90,159			56,288
PROPERTY AND EQUIPMENT, NET		19,911			16,821
GOODWILL		25,724			25,724
OTHER ASSETS		68,642			25,293
TOTAL ASSETS	$	2,760,645		$	1,870,941
LIABILITIES AND SHAREHOLDERS’ EQUITY
POLICY LIABILITIES AND ACCRUALS:
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES	$	1,242,256		$	627,086
UNEARNED PREMIUMS		541,717			422,589
TOTAL POLICY LIABILITIES AND ACCRUALS		1,783,973			1,049,675
FUNDS HELD PAYABLE TO REINSURER		124,557			110,011
LOANS PAYABLE		36,781			48,482
PREMIUMS PAYABLE		77,905			35,044
OTHER LIABILITIES		131,894			82,083
TOTAL LIABILITIES		2,155,110			1,325,295
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
PREFERRED STOCK, $.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED, NONE ISSUED AND OUTSTANDING		—			—
COMMON STOCK, NO PAR VALUE, 100,000,000 SHARES AUTHORIZED, 22,231,432 AND 22,007,552 SHARES ISSUED AND OUTSTANDING		291,390			281,088
NOTES RECEIVABLE FROM SHAREHOLDERS		(6,331	)		(5,444	)
ACCUMULATED OTHER COMPREHENSIVE INCOME		15,857			16,715
RETAINED EARNINGS		304,619			253,287
TOTAL SHAREHOLDERS’ EQUITY		605,535			545,646
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,760,645		$	1,870,941

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,
	2004			2003			2004			2003
				(Restated)						(Restated)
REVENUE:
NET EARNED PREMIUMS	$	187,845		$	146,676		$	548,830		$	418,387
NET INVESTMENT INCOME		10,896			9,173			31,669			28,348
NET REALIZED INVESTMENT GAIN (LOSS)		268			474			985			(1,309	)
OTHER INCOME		719			1,988			2,930			3,689
TOTAL REVENUE		199,728			158,311			584,414			449,115
LOSSES AND EXPENSES:
LOSS AND LOSS ADJUSTMENT EXPENSES		760,267			100,645			1,027,473			328,023
NET REINSURANCE RECOVERIES		(612,498	)		(21,240	)		(676,144	)		(65,232	)
NET LOSS AND LOSS ADJUSTMENT EXPENSES		147,769			79,405			351,329			262,791
ACQUISITION COSTS AND OTHER UNDERWRITING EXPENSES		56,863			41,542			155,489			120,120
OTHER OPERATING EXPENSES		1,674			2,668			6,085			5,974
TOTAL LOSSES AND EXPENSES		206,306			123,615			512,903			388,885
INCOME (LOSS) BEFORE INCOME TAXES		(6,578	)		34,696			71,511			60,230
INCOME TAX EXPENSE (BENEFIT):
CURRENT		(1,541	)		10,403			24,222			25,392
DEFERRED		(2,942	)		718			(4,043	)		(6,832	)
TOTAL INCOME TAX EXPENSE (BENEFIT)		(4,483	)		11,121			20,179			18,560
NET INCOME (LOSS)	$	(2,095	)	$	23,575		$	51,332		$	41,670
PER AVERAGE SHARE DATA:
BASIC EARNINGS (LOSS) PER SHARE	$	(0.09	)	$	1.08		$	2.32		$	1.90
DILUTED EARNINGS (LOSS) PER SHARE	$	(0.09	)	$	1.04		$	2.21		$	1.85
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		22,230,729			21,913,053			22,120,481			21,879,748
WEIGHTED-AVERAGE SHARE EQUIVALENTS OUTSTANDING		1,132,451			787,627			1,120,535			681,716
WEIGHTED-AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING		23,363,180			22,700,680			23,241,016			22,561,464