Via Facsimile and U.S. Mail
Mail Stop 6010
December 23, 2005
Mr. Craig P. Keller
Chief Financial Officer
Philadelphia Consolidated Holding Corporation
One Bala Plaza, Suite 100
Bala Cynwyd, Pennsylvania 19004
Re: Philadelphia Consolidated Holding Corporation
Form 10-K for Fiscal Year Ended December 31, 2004
File No. 000-22280
Dear Mr. Keller:
We have limited our review of your filings to those issues
we
have addressed in our comments. In our comments, we ask you to
provide us with more information so we may better understand your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
2004 Form 10-K, filed March 15, 2005
Item 1. Business
Loss and Loss Adjustment Expenses, page 10
1. We believe your disclosure in Management`s Discussion and
Analysis
regarding the reserve for unpaid claims and claim expenses could
be
improved to better explain the judgments and uncertainties
surrounding this estimate and the potential impact on your
financial
statements. We believe that disclosures explaining the likelihood
that materially different amounts would be reported under
different
conditions or using different assumptions is consistent with the
objective of Management`s Discussion and Analysis. Please provide
us
the following information for each of your lines of business, in
disclosure-type format, to help us evaluate the adequacy of your
disclosure.
a. The reserves accrued as of the latest balance sheet date
presented. The total of theses amounts should agree to the
amount presented on the balance sheet.
b. Because IBNR reserve estimates are more imprecise, please
provide
the amount of IBNR separately from case reserves for each line of
business.
c. Describe those assumptions that you believe are the most
significant in determining your loss reserves. For example
significant assumptions could be those assumptions that involve
the
greatest amount of judgment or those assumptions that have the
greatest financial impact on the loss reserve balance.
d. Describe the methodologies used to determine your loss
reserves.
For example this might include a discussion of the various
actuarial
methods used that may vary depending on the nature of the business
underwritten.
e. It is our understanding of the property and casualty insurance
industry that companies will establish reserves either by the
calculation of ranges around the reserves or by the calculation of
point estimates.
i. If management calculates a range in determining the loss
reserve
recorded in the financial statements, describe the range of loss
reserve estimates, the factors that determined the boundaries of
this
range and your basis for selecting the recorded amount rather than
any other amount within the range as the best estimate of incurred
losses. In addition include quantified and narrative disclosure
of
the impact that reasonably likely changes in one or more of these
variables (i.e. actuarially method and/or assumptions used) would
have on reported results, financial position and liquidity.
ii. If management calculates point estimates in determining the
loss
reserve recorded in the financial statements, disclose the
following:
* The various methods considered and the method that was selected
to
calculate the reserves. If multiple point estimates were
generated,
describe the different values for these point estimates. Include
a
discussion of why the method selected was more appropriate over
the
other methods and why one point estimate was selected instead of
other point estimates.
* Clarify whether the loss reserves recorded in the financial
statements are solely based on the point estimate calculated or,
if
not, how that estimate is used. Quantify and describe the
difference
between what is recorded in the financial statements and the point
estimate.
* Include quantified and narrative disclosure of the impact that
reasonably likely changes in one or more of the variables (i.e.
actuarially method and/or assumptions used) would have on
reported
results, financial position and liquidity.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations (2004 vs. 2003), page 31
2. We note that some of your reinsurance contracts have provisions
whereby you are entitled to a return profit commission based on
the
ultimate experience of the underlying business ceded and that this
profit commission reduces ceded written and earned premiums and
increases net written and earned premiums. Please provide to us
your
basis for recording this profit commissions within total revenue
as
it would appear that these profit commissions are more
appropriately
classified as a reduction of your acquisition costs and other
underwriting expenses. Please specifically cite the appropriate
accounting literature relied upon by management to support current
classification within the Consolidated Statements of Operations
and
Comprehensive Income.
Item 8. Financial Statements and supplementary Data
Notes to Consolidated financial Statements
7. Liability for Unpaid Loss and Loss Adjustment Expenses, page 58
3. We note that you write residual value policies, which provide
coverage guaranteeing the value of a lease automobile at the lease
termination. Please tell us how you currently account for these
contracts and the specific accounting literature used. Please
note
that paragraph 8 of EITF 01-12, The Impact of the Requirements of
FASB statement No. 133 on Residual Value Guarantees in Connection
with a Lease, a third-party residual value guarantor should
consider
the guidance in Statement 133 for all residual value guarantees
that
it provides in order to determine whether they are derivatives and
whether they qualify for any of the scope exception in that
Statement. Please provide us your analysis as to whether these
contracts are considered derivatives and whether they qualify for
any
of the scope exceptions. Within your analysis, please provide us
a
detailed description of the typical provisions of this product,
specifically how these contracts are settled.
18. Subsequent Event, page 71
4. Please tell us how you have accounted for the Reinsurance
Commutation and Release Agreement, which you entered into during
February of 2005. Specifically address why there was not gain or
loss realized as a result of this commutation.
Please respond to these comments within 10 business days or
tell
us when you will provide us with a response. Please furnish a
letter
that keys your responses to our comments and provide the requested
information. Detailed letters greatly facilitate our review.
Please
file your letter on EDGAR under the form type label CORRESP.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in your letter, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions, please contact Kevin Woody, Branch
Chief, at (202) 551-3629. In this regard, do not hesitate to
contact
me, at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief Accountant
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Mr. Craig P. Keller
Philadelphia Consolidated Holding Corporation
December 23, 2005
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