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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PHILADELPHIA CONSOLIDATED HOLDING CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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PHILADELPHIA CONSOLIDATED HOLDING CORP.
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
[PHILADELPHIA CONSOLIDATED HOLDING CORP. LIBERTY BELL GRAPHIC]
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
To The Holders of Common Stock:
The Annual Meeting of Shareholders of Philadelphia Consolidated Holding
Corp. will be held on May 3, 2001 at 10:00 A.M. at the Marriott West Hotel, 111
Crawford Avenue, Conshohocken, Pennsylvania for the following purposes:
(1) To elect ten Directors;
(2) To vote on the approval of the appointment of independent auditors
for the year 2001; and
(3) To consider such other business as may properly come before the
meeting.
Shareholders of record at the close of business on April 6, 2001 are entitled to
notice of, and to vote at, said meeting.
By Order of the Board of Directors
CRAIG P. KELLER
Secretary
April 9, 2001
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PHILADELPHIA CONSOLIDATED HOLDING CORP.
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
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PROXY STATEMENT
---------------------
The accompanying proxy is solicited by the Board of Directors of
Philadelphia Consolidated Holding Corp. (the "Company"), for use at the Annual
Meeting of Shareholders to be held at the Marriott West Hotel, 111 Crawford
Avenue, Conshohocken, Pennsylvania on May 3, 2001 at 10:00 A.M. This Proxy
Statement, the foregoing Notice and the enclosed Proxy are being sent to
shareholders of the Company on or about April 9, 2001.
Any Proxy may be revoked at any time before it is voted by written notice,
mailed or delivered to the Secretary of the Company, by delivering a Proxy
bearing a later date or by attending the meeting and voting in person. If your
proxy card is signed and returned without specifying a vote or an abstention on
any proposal, it will be voted in accordance with the Board of Directors'
recommendations on each proposal.
The Board of Directors knows of no other matters which are likely to be
brought before the meeting other than those specified in the notice thereof. If
any other matters properly come before the meeting however, the persons named in
the enclosed proxy, or their duly constituted substitutes acting at the meeting,
will be authorized to vote or otherwise act thereon in accordance with their
judgement on such matters. If the enclosed proxy is properly executed and
returned prior to voting at the meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. In the absence of
instructions, executed proxies will be voted "FOR" the ten nominees for the
Board of Directors; and "FOR" the approval of the selection by the Board of
Directors of PricewaterhouseCoopers LLP as the Company's independent auditors
for the year 2001.
Shareholders of record at the close of business on April 6, 2001 are
entitled to vote at the meeting. On March 30, 2001, the Company had outstanding
13,523,397 shares of Common Stock, no par value. Each outstanding share of
Common Stock is entitled to one vote and there is no cumulative voting. The
presence, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast on the
particular matter shall constitute a quorum for the purpose of considering such
matter.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock of the Company present in person or represented by proxy
at the meeting, with a quorum present. For purposes of the election of
directors, abstentions and broker non-votes are not considered to be votes cast
and do not affect the plurality vote required for directors.
The Company has retained American Stock Transfer & Trust Company to solicit
proxies by mail, courier, telephone, or facsimile and to request brokerage
houses to forward soliciting material to beneficial owners. For these services
the Company will pay a fee of approximately $13,000.
1. ELECTION OF DIRECTORS
The Board of Directors has nominated for election the ten persons named
below, to hold office until the next Annual Meeting and until their successors
have been duly elected and qualified. The Company believes that each nominee
named below will be able to serve. However, should any such nominee be unable to
serve as a director, the persons named in the proxies have advised that they
will vote for the election of such substitute nominee as the Board of Directors
may propose.
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NOMINEES FOR DIRECTOR
The names and ages of the nominees, their principal occupations, length of
service as Directors of the Company, and certain other biographical information
are set forth below:
JAMES J. MAGUIRE, age 67, has served as Chief Executive Officer and
Chairman of the Board of Directors of the Company since its formation in 1981
and its subsidiaries since their formation. Mr. Maguire previously served as
President of the Company. He has worked in the insurance industry for over 40
years with experience in insurance accounting, underwriting, sales and
marketing, claims management and administration.
JAMES J. MAGUIRE, JR., age 40, joined the Company in 1996 and has served on
the Board of Directors since 1997. He currently serves as President and Chief
Operating Officer. Prior to his appointment as President, Mr. Maguire, Jr.
served as Executive Vice President and Chief Operating Officer, and Vice
President of Underwriting for the Company. Mr. Maguire, Jr. was previously
employed as Assistant Vice President of Underwriting with American International
Group, Inc., an insurance and financial services company. Mr. Maguire, Jr. is
the son of Mr. James J. Maguire.
SEAN S. SWEENEY, CPCU, RPLU, age 43, joined the Company in 1979 and has
served on the Board of Directors of the Company since 1996. He currently serves
as Executive Vice President, Director of Marketing. Prior to his appointment as
Executive Vice President, he served as Senior Vice President, Director of
Marketing for the Company since 1987. Mr. Sweeney previously was employed by the
Company as a Regional Vice President, Regional Sales Manager, and sales
representative. His current responsibilities include management of all marketing
and sales for the Company. Mr. Sweeney is the nephew of Mr. James J. Maguire.
ELIZABETH H. GEMMILL, age 55, was elected to the Board of Directors of the
Company in 2000. Ms. Gemmill is currently the Managing Trustee of the Warwick
Foundation. Ms. Gemmill previously served as Vice President and Secretary of the
Tasty Baking Company from 1988 to 1999. Ms. Gemmill serves as a director of
American Water Works Company, Inc., a provider of water and wastewater service,
and Universal Display Corporation, a technology research and development
company.
WILLIAM J. HENRICH, JR., age 72, has served on the Board of Directors since
1996. Mr. Henrich is a senior partner with the law firm of Dilworth, Paxson,
Kalish & Kauffman.
PAUL R. HERTEL, JR., age 73, has served on the Board of Directors of the
Company since 1987. Mr. Hertel has been an insurance broker with Paul Hertel &
Company, Inc., for over 40 years and serves as Chairman of the Executive
Committee of this company.
THOMAS J. MCHUGH, age 69, has served on the Board of Directors of the
Company since 1986. Mr. McHugh is Chairman of the Board and CEO of McHugh
Associates, Inc., a registered investment advisor, since 1986 and has served as
a director of The Rouse Company, a real estate development company, since 1980.
MICHAEL J. MORRIS, age 66, has served on the Board of Directors of the
Company since 1993. Mr. Morris served as Chairman and Chief Executive Officer of
Transport International Pool Corporation, a multinational corporation that
principally provided transport services, from 1975 to his retirement in 1992.
DIRK A. STUUROP, age 52, has served on the Board of Directors of the
Company since 1999. Mr. Stuurop currently is President of Stuurop & Company, a
privately owned strategic advisory firm. Mr. Stuurop previously served in
various investment banking positions with Merrill Lynch and Company from 1982,
until his retirement in early 1999, most recently as Chairman, Global Financial
Institutions. Additionally, Mr. Stuurop serves as director of Exodus
Communications, a provider of Internet system and network management solutions,
is a member of the Wharton Graduate Executive Board, a director of the
Netherland America Foundation, and a director of various private corporations.
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J. EUSTACE WOLFINGTON, age 68, has served on the Board of Directors of the
Company since 1986. Mr. Wolfington served as President of the H.A.C. Group of
Companies, an international automobile leasing consulting firm from 1981 until
his retirement in 2000.
ADDITIONAL INFORMATION REGARDING THE BOARD
MEETINGS. During 2000, the Board of Directors met four times. Each
director attended at least 75% of the meetings of the Board of Directors and any
committee on which such director served, except for Mr. J. Eustace Wolfington,
who attended 70% of all such meetings.
BOARD COMMITTEES. The Audit Committee met three times in 2000. The current
Audit Committee consists of Messrs. Stuurop (Chairman), Henrich, Jr., and
Wolfington. Among other duties, the Audit Committee recommends the selection of
the Company's independent auditors and reviews the Company's financial
condition, and the scope and results of the independent audit and any internal
audit.
The Compensation Committee met one time in 2000. The current Compensation
Committee consists of Messrs. Hertel, Jr. (Chairman), McHugh, and Morris. Among
other duties, the Compensation Committee evaluates the performance of principal
officers, recommends to the Board of Directors the selection and compensation of
principal officers, and administers the Company's various compensation plans.
The Investment Committee met three times in 2000 and is responsible for
monitoring investment policy and activities. The current Investment Committee
consists of Messrs. Morris (Chairman), Maguire, Maguire, Jr., Hertel, Jr.,
Stuurop, Sweeney, Wolfington, and Ms. Gemmill.
The Nominating Committee met two times in 2000 and currently consists of
Messrs. McHugh (Chairman), Maguire, Maguire, Jr., Henrich, Jr., and Sweeney. The
Nominating Committee is responsible for recommending to the Board of Directors
candidates for nomination to the Board. The Nominating Committee will consider
recommendation of candidates for nomination to the Board of Directors from
shareholders. In order for shareholder recommendations to be considered for the
2002 Annual Meeting, such recommendations must be received by the President of
the Company at One Bala Plaza, Suite 100, Bala Cynwyd, Pennsylvania 19004 no
later than March 13, 2002. Any recommendation must be accompanied by the written
consent of the individual recommended to serve as a Director.
RELATED PARTY TRANSACTIONS. The Company utilized investment advisory
services from McHugh Associates Inc. of which a board member, Thomas J. McHugh
is a shareholder and serves as Chairman of the Board and CEO. The fee for these
services amounted to $200,000 for 2000.
Mr. James J. Maguire, the Company's Chairman and Chief Executive Officer,
had outstanding advances from the Company in varying amounts during 2000, the
highest aggregate amount of which was $1,058,000. These advances were
non-interest bearing and were repaid in full on January 23, 2001. Also, Mr.
Timothy J. Maguire, a Company Vice President, has an outstanding non-interest
bearing advance from the Company in the amount of $120,000. Mr. Timothy J.
Maguire is the son of Mr. James J. Maguire.
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MANAGEMENT -- DIRECTORS AND EXECUTIVE OFFICERS
Directors hold office until the next annual meeting of the shareholders, or
until their successors are duly elected and qualified. Officers are elected by
and serve at the discretion of the Board of Directors. The Directors and
Executive Officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
James J. Maguire............ 67 Chairman of the Board of Directors and Chief
Executive Officer
James J. Maguire, Jr. ...... 40 Director, President and Chief Operating Officer
Sean S. Sweeney............. 43 Director, Executive Vice President
Elizabeth H. Gemmill........ 55 Director
William J. Henrich, Jr. .... 72 Director
Paul R. Hertel, Jr. ........ 73 Director
Thomas J. McHugh............ 69 Director
Michael J. Morris........... 66 Director
Dirk A. Stuurop............. 52 Director
J. Eustace Wolfington....... 68 Director
Craig P. Keller............. 50 Senior Vice President, Secretary, Treasurer, and
Chief Financial Officer
See "Nominees for Director" for the biographies of Ms. Gemmill, and Messrs.
Maguire, Maguire, Jr., Sweeney, Henrich, Jr., Hertel, Jr., McHugh, Morris,
Stuurop, and Wolfington.
CRAIG P. KELLER, age 50, joined the Company as Vice President and Chief
Financial Officer in December 1992 and was appointed Secretary in 1993,
Treasurer in 1997 and Senior Vice President in 1999. Mr. Keller was previously
employed by Reliance Insurance Group, Inc., a subsidiary of Reliance Group
Holdings, where he served in various financial capacities from 1985 through
1992, including Assistant Vice President from June 1991 to December 1992. Mr.
Keller, formerly with Coopers & Lybrand, is a Certified Public Accountant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 2001 by: (i) each person known to
the Company to own beneficially more than 5% of the outstanding Common Stock;
(ii) each of the Company's nominees for directors and persons referred to in the
Summary Compensation Table; and (iii) all of the directors and executive
officers as a group. As used in this table, "beneficially owned" means the sole
or shared power to vote or dispose of, or to direct the voting or disposition
of, the shares, or the right to acquire such power within 60 days after March
31, 2001 with respect to any shares.
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME(1) OWNED(2) OWNED
- ------- ------------ ------------
James J. Maguire............................................ 4,618,781(3) 34.2%
Elizabeth H. Gemmill........................................ 189 *
William J. Henrich, Jr. .................................... 6,000 *
Paul R. Hertel, Jr. ........................................ 18,000(4) *
Roger L. Larson............................................. 9,786(5) *
Thomas J. McHugh............................................ 8,000 *
Michael J. Morris........................................... 21,000 *
Dirk A. Stuurop............................................. 11,977 *
J. Eustace Wolfington....................................... 412,350 3.0%
Sean S. Sweeney............................................. 132,700 1.0%
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SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME(1) OWNED(2) OWNED
- ------- ------------ ------------
Craig P. Keller............................................. 6,932 *
James J. Maguire, Jr........................................ 865,137(6) 6.4%
Thomas G. Maguire........................................... 858,528(7) 6.3%
The Kaufmann Fund, Inc...................................... 1,300,000(8) 9.6%
FMR Corp.................................................... 1,141,595(8) 8.4%
Liberty Wanger Asset Management, L.P., WAM Acquisition GP,
Inc., and Liberty Acorn Trust............................. 840,000(9) 6.2%
All Directors and Executive Officers as a Group (12
persons).................................................. 6,110,852 45.0%
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* Less than 1%
(1) The named shareholders' business address is One Bala Plaza, Suite 100, Bala
Cynwyd, PA 19004, except that, the business address of: The Kaufmann Fund,
Inc. is 140 E. 45th Street, 43rd Floor, New York, NY 10017; FMR Corp. is 82
Devonshire Street, Boston, MA 02109; and Liberty Wanger Asset Management
L.P., WAM Acquisition GP, Inc. and Liberty Acorn Trust is 227 West Monroe
Street, Suite 3000, Chicago, IL 60606.
(2) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, unless otherwise noted in the footnotes to this
table and except for shares referred to in the following sentence. With
respect to Mr. Sean S. Sweeney, the shares beneficially owned include 50,000
shares subject to currently outstanding options exercisable on or before 60
days from March 31, 2001.
(3) Of these shares, 1,750,500 are owned jointly by Mr. Maguire and his wife
Frances Maguire, as to which Mr. Maguire shares the voting and investment
power with his wife; 254,266 shares are owned by The Maguire Foundation of
which Mr. Maguire is co-director with his wife; and 200,000 are owned of
record by his wife. Mr. Maguire disclaims beneficial ownership of the
200,000 shares owned of record by his wife.
(4) Record owner is P&E Limited Partnership, a family limited partnership of
which Mr. Hertel and his wife are general partners. Mr. Hertel has shared
voting and investment power with his wife with respect to these shares.
(5) Of these shares, 8,775 are owned by The Roger L. Larson Trust, which is
controlled by Roger L. Larson and his wife as co-trustees. Mr. Larson has
shared voting and investment power with his wife with respect to these
shares.
(6) Of these shares, 110,816 shares are owned by a trust for the benefit of Mr.
James J. Maguire, Jr. and 747,712 shares are in trusts for the other
children of Mr. James J. Maguire, of which Mr. James J. Maguire, Jr. is
deemed to be beneficial owner of such shares because he has shared voting
and investment power of such shares as co-trustee of these trusts.
(7) These shares are owned by trusts for the children of Mr. James J. Maguire
and Mr. Thomas G. Maguire is deemed to be beneficial owner of such shares
because he has shared voting and investment power of such shares as
co-trustee of these trusts.
(8) According to the Schedules 13G filed with the Company by The Kaufmann Fund,
Inc., and FMR Corp., respectively, these shares were acquired in the
ordinary course of business, were not acquired for the purpose of and do not
have the effect of changing or influencing the control of the issuer of such
securities and were not acquired in connection with, or as a participant in,
any transaction having such purposes or effect.
(9) According to the Schedule 13G filed with the Company, Liberty Wanger Asset
Management L.P. and WAM Acquisition GP, Inc. have shared voting and
dispositive power for 840,000 shares and Liberty Acorn Trust has shared
voting and dispositive power for 675,000 shares. Additionally, according to
this Schedule 13G, these shares were acquired and are held in the ordinary
course of business and were not acquired and are not held for the purpose of
or with the effect of changing or influencing the control of the
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issuer and were not acquired and are not held in connection with or as a
participant in any transaction having that purpose or effect.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
and changes in ownership with the Securities and Exchange Commissioner ("SEC").
Officers, directors, and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, for
the period January 1, 2000 through December 31, 2000, or its knowledge that no
Forms 5 were required for certain reporting persons, the Company believes that
all filing requirements applicable to its officers and directors were complied
with, except for one late filing of a Form 5, for Mr. Stuurop, and two late
filings of a Form 4 for Mr. Maguire, Jr. in his capacity as co-trustee.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during each of the last three years
to the Company's Chief Executive Officer, and each of the Company's other
executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
--------------------
ANNUAL NO. OF
COMPENSATION SHARES UNDERLYING
-------------------- -------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) SARS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ---------- ------- ---------------
James J. Maguire, Chief 2000 813,750 -- -- -- 179,442(1)(3)
Executive Officer and 1999 845,048 -- -- -- 165,000(1)(3)
Chairman of the Board 1998 812,557 500,000 -- -- 192,006(1)(3)
James J. Maguire, Jr., Director, 2000 250,000 -- 5,000 -- 637(1)
President and Chief 1999 238,462 -- 100,000 -- 6,135(1)(2)
Operating Officer 1998 170,250 50,000 -- -- 12,919(1)(2)
Sean S. Sweeney, Director and 2000 220,000 -- 40,000 -- 8,287(1)
Executive Vice President 1999 218,077 30,000 -- -- 9,986(1)(2)
1998 174,685 131,177 -- -- 8,831(1)
Craig P. Keller, Senior Vice 2000 210,000 -- 5,000 -- 8,758(1)
President, Secretary, Treasurer, 1999 193,678 -- -- -- 10,349(1)(2)
and Chief Financial Officer 1998 168,712 20,000 25,000 -- 11,483(1)(2)
- ---------------------------
(1) Includes both matching and profit sharing contributions by the Company under
its defined contribution plan, as well as premiums paid on term life
insurance policies.
(2) Includes the discount from the fair market value of the Company's common
stock purchased pursuant to the Company's Employee Stock Purchase Plan.
(3) Pursuant to an agreement between the Company and a trust created by Mr.
James J. Maguire and his wife, Frances M. Maguire, the Trust has purchased a
split-dollar life insurance policy on the joint lives of Mr. Maguire and his
wife. Under the agreement, the Company pays the premium on the policy and
the trust is the beneficiary of the insurance policy. However, the Company
has been granted a security interest in the death benefit of the policy
equal to the sum of all premium payments made by the Company. The
arrangement is designed so that if the assumptions made as to mortality
experience, policy dividends and other factors are realized, the Company,
upon the death of the survivor of Mr. Maguire and
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his wife or the surrender of the policy, will recover all of its insurance
premium payments which do not include certain amounts paid to Mr. Maguire,
as described below. The premium paid by the Company in 2000 and 1999
pursuant to this arrangement was $338,174 each year. The amount in this
column does not include such premium payment. However, the amount in this
column includes the sum of each future years' present value of the imputed
interest on such premium payment (adjusted for the cost of term insurance
based upon the joint lives of Mr. Maguire and his wife). The interest amount
calculated for 2000 and 1999 is $163,041 and $148,065, respectively.
Pursuant to the split dollar arrangement described above, Mr. Maguire
receives each year an amount equal to the portion of the annual premium due
and payable on the life insurance policy which is not paid by the Company
pursuant to the above described formula, but paid by Mr. Maguire. The amount
reported in this column included said amount totaling $7,756 and $7,181 in
2000 and 1999, respectively.
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options during 2000 to the Company's Chief Executive Officer and each of the
Company's executive officers. There were no stock appreciation rights ("SARs")
granted in 2000 for the named persons.
OPTION GRANTS IN 2000
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
NO. OF SHARES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM($)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED(1) IN 2000 ($/SHARE) DATE 5% 10%
- ---- ------------- ------------ ------------ ---------- --------- ---------
James J. Maguire............... -- -- -- -- -- --
James J. Maguire, Jr. ......... 5,000 1.8% $22.813 11/01/10 31,500 69,600
Sean S. Sweeney................ 35,000 12.8% $14.375 1/03/10 139,000 307,200
5,000 1.8% $22.813 11/01/10 31,500 69,600
Craig P. Keller................ 5,000 1.8% $22.813 11/01/10 31,500 69,600
- ---------------------------
(1) Options are exercisable after the fifth anniversary from date of grant.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information relating to the exercise of
stock options by Mr. Maguire and the number and value of options and SARs held
at December 31, 2000 by the Company's Chief Executive Officer and by each of the
Company's other executive officers.
AGGREGATED OPTION/SAR EXERCISES IN 2000 AND
OPTION/SAR VALUES AT DECEMBER 31, 2000(1)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
SHARES VALUE AT FISCAL YEAR END(#) FISCAL YEAR END($)
ACQUIRED ON REALIZED --------------------------- ---------------------------
EXERCISE(#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ---------- ----------- ------------- ----------- -------------
James J. Maguire.......... 2,613,492 64,406,900 -- -- -- --
James J. Maguire,
Jr.(3).................. -- -- -- 307,900 -- 6,117,600
Sean S. Sweeney(4)........ -- -- -- 240,000 -- 4,530,300
Craig P. Keller(5)........ -- -- -- 42,500 -- 545,000
- ---------------------------
(1) All share and per share amounts granted prior to November 1997 were restated
to reflect a two for one split of the Company's common stock distributed in
November 1997.
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(2) An individual, upon exercise of an option, does not receive cash equal to
the amount contained in the Value Realized column of this table. Instead,
the amount contained in the Value Realized column reflects the increase in
the price of the Company's Common Stock from the option grant date to the
option exercise date. No cash is realized until the shares received upon
exercise of an option are sold.
(3) Exercise price of: $8.500 for 2,900 options; $9.313 for 200,000 options;
$13.875 for 100,000 options; $22.813 for 5,000 options.
(4) Exercise price of: $8.125 for 100,000 options; $14.375 for 35,000 options;
$22.813 for 5,000 options; Base price of $14.50 for 100,000 SARs.
(5) Exercise price of: $20.500 for 25,000 options; $22.813 for 5,000 options;
Base price of $11.250 for 12,500 SARs.
DIRECTORS COMPENSATION
Non-employee directors receive annual compensation of $18,000, plus $1,000
for each Board meeting attended and $500 for each Committee meeting attended.
Non-employee directors may designate a portion of their fees to be used for the
purchase of shares of the Company's common stock under the terms of the
Directors Stock Purchase Plan.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for administering the compensation program for the Company's
executives including the executive officers named in the Summary Compensation
Table. The Committee is composed exclusively of independent, non-employee
directors who are not eligible to participate in any of the Company's executive
compensation programs. All decisions by the Committee relating to the
compensation of the Company's executive officers are reviewed by the Board of
Directors.
COMPENSATION PHILOSOPHY. The Company's executive compensation program is
based upon a pay-for-performance philosophy. The Company is committed to a
strong link between its business and strategic goals and its compensation
program. The financial goals for certain elements of the compensation program
are reviewed and approved by the Board in conjunction with its approval of the
Company's strategic and operating plans.
BASE SALARY. An executive's base salary is determined by an assessment of
his or her sustained performance, experience, scope and job demands, as well as
current salary levels at peer companies. While some of these companies are in
the Nasdaq Insurance Stocks Index and some are not, these were generally
selected for the peer group because they were considered comparable to the
Company either in terms of market capitalization, or because they compete with,
or are in lines of business related to, the Company's business.
ANNUAL INCENTIVES. The Company utilizes cash bonuses as a principal method
of tying compensation to performance. The cash bonus for the CEO, if any, is
calculated based on an earnings per share formula, with other executive's cash
bonuses also based upon an earnings per share formula, and with respect to
marketing executives, based upon production and profitability goals. The Company
believes that the cash bonus creates a direct link between the Company's
profitability and the compensation of executives. Incentive compensation is also
provided by the Company's Amended and Restated Employees' Stock Option Plan (the
"Stock Option Plan") and the awarding of Stock Appreciation Rights.
RATIONALE FOR CHIEF EXECUTIVE OFFICER COMPENSATION. In setting Mr.
Maguire's 2000 base salary and bonus, the Compensation Committee considered,
among other factors, compensation levels for chief executive officers of other
peer specialty property and casualty insurance companies, Mr. Maguire's
experience and knowledge of the industry and the favorable developments achieved
by the Company in 1999 under Mr. Maguire's leadership, including $15.1 million
of net operating income, the reaffirmation of the A+
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(Superior) rating from A.M. Best Company for the Company's insurance
subsidiaries, the successful completion of the Company's acquisition of Liberty
American Insurance Group, Inc., the continued expansion of the Company's
marketing organization, and the continued development of the Preferred Agent
program.
POLICY ON DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal
Revenue Code ("Section 162(m)") limits to $1.0 million the annual tax deduction
for compensation paid to the Chief Executive Officer and any of the four highest
paid other executive officers unless certain requirements for performance-based
compensation are met. The Compensation Committee considered these requirements
and designed the Cash Bonus Plan of the Chief Executive Officer and the Stock
Option Plan, accordingly. The Committee currently intends to continue to comply
with the requirements of Section 162(m) but reserves the right to alter the Cash
Bonus Plan and the Stock Option Plan if it believes that doing so would be in
the best interests of the Company and its shareholders.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
PAUL R. HERTEL, JR., CHAIRMAN
THOMAS J. MCHUGH
MICHAEL J. MORRIS
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STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of the NASDAQ Stock
Market (U.S.) ("NASDAQ -- US") Index and the NASDAQ Insurance Stocks Index (SIC
Codes 631 and 633) ("NASDAQ -- INS"). The comparison begins on December 31,
1995.
LOGO
--------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------
Philadelphia Consolidated
Holding Corp. 100.00 143.08 218.46 278.46 178.46 380.00
The NASDAQ Stock Market
(US) 100.00 123.04 150.69 212.51 394.92 237.62
NASDAQ Insurance Stocks 100.00 113.99 167.21 148.98 115.57 145.12
INDEPENDENT AUDITORS FEES
In addition to retaining PricewaterhouseCoopers LLP ("PWC") to audit the
consolidated financial statements for 2000, the Company retained PWC to provide
various other services in 2000, and expect to continue to do so in the future.
The aggregate fees billed for professional services by PWC in 2000 for these
various services were:
- Audit Fees: $113,750 for services rendered for the annual audit of the
Company's consolidated financial statements for 2000 and the quarterly
reviews of the financial statements included in the Company's Forms 10-Q;
- Financial Information Systems Design and Implementation Fees: None.
- All Other Fees: $31,000, which consists primarily of fees for the
Company's insurance subsidiaries actuarial certification.
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AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Committee") is
comprised of the three directors named below. Each member of the Committee is an
independent director under the rules of the National Association of Securities
Dealers, Inc. through its Nasdaq Stock Market Inc. subsidiary. The Committee has
adopted a written charter which has been approved by the Board of Directors, and
which is set forth in Appendix A of this Proxy Statement. The Committee has
reviewed and discussed the Company's audited financial statements with
management, which has primary responsibility for the financial statements. PWC,
the Company's independent auditors for 2000, are responsible for expressing an
opinion on the conformity of the Company's audited financial statements with
generally accepted accounting principles. The Committee has discussed with PWC
the matters that are required to be discussed by Statement on Auditing Standards
No. 61 (Communication With Audit Committees). PWC has provided to the Committee
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed independence matters with PWC. The Committee also considered
whether PWC's provisions of non-audit services is compatible with PWC's
independence.
Based on the considerations referred to above, the Committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for 2000 and that PWC be appointed
independent auditors for the Company for 2001. The foregoing report is provided
by the following independent directors, who constitute the Audit Committee:
Dirk A. Stuurop (Chairman)
William J. Henrich, Jr.
J. Eustace Wolfington
2. APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to the shareholders' approval, the Board of Directors has appointed
the firm of PricewaterhouseCoopers LLP, which served as the Company's
independent auditors for the year 2000, to serve as the Company's independent
auditors for the year 2001. If the shareholders do not approve this appointment
by the affirmative vote of a majority of shares present in person or represented
by proxy at the meeting, other independent auditors will be considered by the
Board.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the meeting and will have the opportunity to make a statement if the
representative desires to do so. The representative is also expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSALS OF SHAREHOLDERS
It is currently contemplated that the Company's 2002 Annual Meeting of
Shareholders will be held on May 2, 2002. In order to be set forth in the
Company's Proxy Statement for such meeting, shareholder proposals must be
received by the President of the Company at One Bala Plaza, Suite 100, Bala
Cynwyd, Pennsylvania 19004, no later than December 9, 2001.
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APPENDIX A
AUDIT COMMITTEE CHARTER
ADOPTED JUNE 6, 2000
PURPOSE
The Audit Committee (the "Committee") shall provide assistance to the Board
of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process. This includes
overviewing the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or users thereof,
the Company's systems of internal accounting and financial controls, and the
annual independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or other experts for this purpose. The Board and the Committee
are in place to represent the Company's shareholders; accordingly, the
independent accountants are ultimately accountable to the Board and the
Committee.
COMPOSITION AND EXPERTISE
The Committee shall be comprised of three or more directors, as determined
by the Board, each of whom shall, except as may otherwise be permitted under the
rules of the National Association of Securities Dealers, Inc. through its Nasdaq
Stock Market Inc. ("Nasdaq") subsidiary, fulfill the independence requirements
of Nasdaq, and shall be free from any relationship that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgement as
a member of the Committee. All members of the Committee shall be financially
literate or shall become financially literate within a reasonable period of time
after appointment to the Committee and at least one member of the Committee
shall have accounting or related financial expertise.
The members of the Committee shall be determined by the Board at its annual
organizational meeting or until their successors shall be duly elected and
qualified. Unless a Chairperson is elected by the Board, the members of the
Committee may designate a Chairperson by a majority vote of the full Committee
membership.
MEETINGS
The Committee shall meet annually with management, the director of the
internal auditing department and the independent accountants separately to
discuss any matters that the Committee or each of these groups believes should
be discussed privately. Additionally, the Committee or its Chairperson shall
meet with the independent accountants and management quarterly to review the
Company's financial statements consistent with the Committee's key
responsibilities below.
KEY RESPONSIBILITIES
The Committee's purpose is one of oversight and the Committee recognizes
that the Company's management is responsible for preparing the Company's
financial statements and that the independent accountants are responsible for
auditing such financial statements, and that the financial management, including
the internal auditing staff, as well as the independent accountants, have more
time, knowledge and detailed information on the Company than does the Committee.
Consequently, in discharging its oversight role, the Committee is not providing
any expert or special assurance as to the Company's financial statements, any
professional certification as to the independent accountant's work, or
compliance with laws and regulations and the Company's code of conduct. It is
not the duty of the Committee to plan or conduct audits or to
A-1
15
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent accountants.
The following shall be recurring activities of the Committee in carrying
out its oversight role. These activities are set forth as a guide from which the
Committee may diverge given the circumstances.
- The Committee shall review with management and the independent
accountants the audited financial statements to be included in the
Company's Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K) and review
and consider with the independent accountants the matters required to be
discussed by Statement of Auditing Standards ("SAS") No. 61, as amended.
- As a whole, or through the Committee chairperson, the Committee shall
review with the independent accountants the Company's interim financial
results to be included in the Company's quarterly reports on Form 10-Q to
be filed with the Securities and Exchange Commission and the matters
required to be discussed by SAS No. 61 as amended; this review will occur
prior to the Company's filing of the Form 10-Q.
- The Committee shall discuss with management and the independent
accountants the quality and adequacy of the Company's internal accounting
and financial controls.
- The Committee shall advise the Board with respect to the Company's
policies and procedures regarding compliance with the Company's code of
conduct.
- The Committee shall:
- request from the independent accountants annually, a formal written
statement delineating all relationships between the independent
accountants and the Company consistent with Independence Standards
Board Standard Number 1;
- discuss with the independent accountants any such disclosed
relationships and their impact on the independent accountants'
independence; and
- recommend that the Board take appropriate action to oversee the
independence of the independent accountants.
- annually prepare a report to the Company's shareholders as required by
Item 306 of Regulation S-K; and submit such report for inclusion in
the Company's annual proxy statement.
- The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to nominate for
shareholder approval, evaluate and, where appropriate, replace the
independent accountants.
- The Committee shall review and assess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval.
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- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
PHILADELPHIA CONSOLIDATED HOLDING CORP.
The undersigned shareholder hereby appoints James J. Maguire and Craig P.
Keller, or either one of them, the proxies of the undersigned, with full power
of substitution, to vote all the shares of common stock of Philadelphia
Consolidated Holding Corp. standing in the name of the undersigned at the close
of business on April 6, 2001 at the Annual Meeting of Shareholders of the
Company to be held on Thursday, May 3, 2001 at 10:00 a.m. EDT and at any and all
adjournments thereof, with all the powers the undersigned would possess if
the undersigned were present.
The undersigned shareholder instructs the proxies to vote as specified on this
proxy on the matters described in the Company's Proxy Statement dated April 9,
2001. Proxies will be voted as instructed.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
COMPANY'S NOMINEES AS DIRECTORS (INCLUDING THE ELECTION OF ANY PERSON TO THE
BOARD OF DIRECTORS WHERE A NOMINEE NAMED IN THE PROXY STATEMENT IS UNABLE OR
WILL NOT SERVE); AND FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS.
BY EXECUTION OF THIS PROXY, THE UNDERSIGNED SHAREHOLDER CONFERS UPON THE
ABOVE-APPOINTED PROXIES THE DISCRETIONARY AUTHORITY TO VOTE UPON ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of the Proxy Statement and Notice of said
meeting, both dated April 9, 2001, and the Company's 2000 Annual Report to
Shareholders.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
17
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
PHILADELPHIA CONSOLIDATED HOLDING CORP.
MAY 3, 2001
- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED -
A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS.
FOR WITHHELD
[ ] [ ]
For, except vote withheld from the following nominee(s):
______________________________________________________________
______________________________________________________________
NOMINEES: Elizabeth H. Gemmill
William J. Henrich, Jr.
Paul R. Hertel, Jr.
James J. Maguire
James J. Maguire, Jr.
Thomas J. McHugh
Michael J. Morris
Dirk A. Stuurop
Sean S. Sweeney
J. Eustace Wolfington
2. APPOINTMENT OF INDEPENDENT AUDITORS:
Appointment of PricewaterhouseCoopers LLP as independent auditors for the
fiscal year ending December 31, 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THIS PROXY SHALL BE VALID AND MAY BE
VOTED WHETHER OR NOT THE SHAREHOLDER'S NAME IS SET FORTH BELOW OR A SEAL IS
AFFIXED OR THE DESCRIPTION, AUTHORITY OR CAPACITY OF THE PERSON SIGNING IS
GIVEN OR OTHER DEFECT OF SIGNATURE EXISTS.
Signature of Shareholder(s)_________________________ DATE________ 2001
NOTE: Please sign your name exactly as it appears hereon. When signing as
attorney-in-fact, executor, administrator, trustee, or guardian, please add
your title as such, and if signer is a corporation, please sign with full
corporate name by duly authorized officer or officers and affix the corporate
seal. Where stock is issued in the name of two or more persons, all such persons
should sign.