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

PHILADELPHIA CONSOLIDATED HOLDING CORP.
FIRST QUARTER RESULTS
MARCH 31, 2006

APRIL 25, 2006 PRESS RELEASE

Bala Cynwyd, PA — Philadelphia Consolidated Holding Corp. (PHLY-NASDAQ) today reported net income for the quarter ended March 31, 2006 increased 10.3% to $50.3 million ($0.70 diluted earnings per share and $0.73 basic earnings per share) from $45.6 million ($0.64 diluted earnings per share and $0.68 basic earnings per share) for the quarter ended March 31, 2005. After-tax net realized investment gains (losses) were $(0.3) million of losses for the quarter ended March 31, 2006 ($0.00 diluted loss per share) versus $7.0 million of gains ($0.10 diluted earnings per share) for the quarter ended March 31, 2005. Gross written premiums increased 15.0% to $328.0 million from $285.1 million for the quarter ended March 31, 2005, and the combined ratio for the quarter was 79.7% versus 80.4% for the quarter ended March 31, 2005. The Company’s book value per share at March 31, 2006 increased 6.2% to $12.52 from $11.79 at December 31, 2005.

James J. Maguire, Jr. CEO said, “In the first quarter, we continued to demonstrate the fundamental strength of our franchise by growing gross premiums 15%, while having a combined ratio of 79.7%. We saw new business opportunities across all business segments, and renewal retention levels remained in the mid 90 percent range. Although competitive in certain areas, pricing levels remain adequate across all lines of business. I believe that with continued execution of our core business principles, we will continue to have outstanding results from our operations.”

The Company will hold its quarterly conference call to discuss first quarter 2006 results today at 3:00 PM EDT. 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.

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

Press Release
April 25, 2006
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willingness of the Company’s reinsurers to pay; (ix) future terrorist attacks; (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; and (xi) the outcome of industry-wide investigations being conducted by various insurance departments, attorneys-general and other authorities relating to the use of contingent commission arrangements. The Company does not intend to publicly update any forward looking statement, except as may be required by law.

Philadelphia Insurance Companies is a specialty niche Company which markets and underwrites property and casualty insurance products through 38 proprietary underwriting offices across the U.S. of A. For more information about our Company or to review our 2005 annual report, visit our web site atwww.phly.com.

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

	As of
	March 31, 2006			December 31,
	(Unaudited)			2005
ASSETS
INVESTMENTS:
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET (AMORTIZED COST $1,841,899 AND $1,778,215)	$	1,808,325		$	1,761,530
EQUITY SECURITIES AT MARKET (COST $215,567 AND $160,926)		236,310			173,455
TOTAL INVESTMENTS		2,044,635			1,934,985
CASH AND CASH EQUIVALENTS		115,479			74,385
ACCRUED INVESTMENT INCOME		18,129			18,095
PREMIUMS RECEIVABLE		264,319			286,778
PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES		327,953			396,248
DEFERRED INCOME TAXES		40,683			31,893
DEFERRED ACQUISITION COSTS		134,495			129,486
PROPERTY AND EQUIPMENT, NET		23,896			23,886
OTHER ASSETS		24,654			32,070
TOTAL ASSETS	$	2,994,243		$	2,927,826
LIABILITIES AND SHAREHOLDERS’ EQUITY
POLICY LIABILITIES AND ACCRUALS:
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES	$	1,270,631		$	1,245,763
UNEARNED PREMIUMS		641,882			631,468
TOTAL POLICY LIABILITIES AND ACCRUALS		1,912,513			1,877,231
FUNDS HELD PAYABLE TO REINSURER		—			39,221
PREMIUMS PAYABLE		60,783			58,839
OTHER LIABILITIES		147,544			136,039
TOTAL LIABILITIES		2,120,840			2,111,330
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, 69,782,270 AND
69,266,016 SHARES ISSUED AND OUTSTANDING		344,381			332,757
NOTES RECEIVABLE FROM SHAREHOLDERS		(6,617	)		(7,217	)
ACCUMULATED OTHER COMPREHENSIVE LOSS		(8,340	)		(2,702	)
RETAINED EARNINGS		543,979			493,658
TOTAL SHAREHOLDERS’ EQUITY		873,403			816,496
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,994,243		$	2,927,826

2005 share information restated to reflect a three-for-one split of the Company’s common stock distributed on March 1, 2006.

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)

	For the Three Months
	Ended March 31,
	2006			2005
REVENUE:
NET EARNED PREMIUMS	$	276,546		$	236,755
NET INVESTMENT INCOME		20,062			13,491
NET REALIZED INVESTMENT GAIN (LOSS)		(394	)		10,798
OTHER INCOME		491			480
TOTAL REVENUE		296,705			261,524
LOSSES AND EXPENSES:
LOSS AND LOSS ADJUSTMENT EXPENSES		162,024			154,464
NET REINSURANCE RECOVERIES		(18,359	)		(27,993	)
NET LOSS AND LOSS ADJUSTMENT EXPENSES		143,665			126,471
ACQUISITION COSTS AND OTHER UNDERWRITING EXPENSES		77,017			63,948
OTHER OPERATING EXPENSES		2,332			3,939
TOTAL LOSSES AND EXPENSES		223,014			194,358
INCOME BEFORE INCOME TAXES		73,691			67,166
INCOME TAX EXPENSE (BENEFIT):
CURRENT		29,124			24,275
DEFERRED		(5,754	)		(2,680	)
TOTAL INCOME TAX EXPENSE		23,370			21,595
NET INCOME	$	50,321		$	45,571
PER AVERAGE SHARE DATA:
BASIC EARNINGS PER SHARE	$	0.73		$	0.68
DILUTED EARNINGS PER SHARE	$	0.70		$	0.64
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		69,377,774			67,273,227
WEIGHTED-AVERAGE SHARE EQUIVALENTS OUTSTANDING		2,982,230			4,310,019
WEIGHTED-AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING		72,360,004			71,583,246

2005 share information restated to reflect a three-for-one split of the Company’s common stock distributed on March 1, 2006.