UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2001
COMMISSION FILE NUMBER 0-22280
PHILADELPHIA CONSOLIDATED HOLDING CORP.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2202671
(State of Incorporation) (IRS Employer Identification No.)
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
(610) 617-7900
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of October 29, 2001.
Common Stock, no par value, 17,891,648 shares outstanding,
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
INDEX
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
Part I - Financial Information
Consolidated Balance Sheets - September 30, 2001 and
December 31, 2000 3
Consolidated Statements of Operations and Comprehensive
Income - For the three and nine months ended
September 30, 2001 and 2000 4
Consolidated Statements of Changes in Shareholders' Equity - For the
nine months ended September 30, 2001 and year ended
December 31, 2000 5
Consolidated Statements of Cash Flows - For the nine
months ended September 30, 2001 and 2000 6
Notes to Consolidated Financial Statements 7-11
Management's Discussion and Analysis of Results of Operations and
Financial Condition 12-16
Quantitative and Qualitative Disclosures About Market Risk 17
Part II - Other Information 18
Signatures 19
2
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
As of
------------------------------
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
INVESTMENTS:
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET
(AMORTIZED COST $492,838 AND $392,439) ............ $ 506,449 $ 394,733
EQUITY SECURITIES AT MARKET (COST $30,509 AND $24,087) 37,182 42,553
--------- ---------
TOTAL INVESTMENTS ............................... 543,631 437,286
CASH AND CASH EQUIVALENTS .............................. 45,330 49,742
ACCRUED INVESTMENT INCOME .............................. 6,165 5,726
PREMIUMS RECEIVABLE .................................... 98,307 69,377
PREPAID REINSURANCE PREMIUMS AND
REINSURANCE RECEIVABLES ........................... 97,556 73,513
INCOME TAXES RECOVERABLE ............................... -- 13,323
DEFERRED INCOME TAXES .................................. 4,675 909
DEFERRED ACQUISITION COSTS ............................. 41,955 33,324
PROPERTY AND EQUIPMENT ................................. 10,278 10,476
GOODWILL LESS ACCUMULATED AMORTIZATION
OF $5,231 AND $4,112 .............................. 26,190 30,809
OTHER ASSETS ........................................... 5,481 5,979
--------- ---------
TOTAL ASSETS .................................... $ 879,568 $ 730,464
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
POLICY LIABILITIES AND ACCRUALS:
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES ............. $ 286,787 $ 237,494
UNEARNED PREMIUMS .................................... 200,189 145,484
--------- ---------
TOTAL POLICY LIABILITIES AND ACCRUALS ........... 486,976 382,978
LOANS PAYABLE .......................................... 29,841 22,000
PREMIUMS PAYABLE ....................................... 27,455 20,868
OTHER LIABILITIES ...................................... 26,235 23,388
--------- ---------
TOTAL LIABILITIES ............................... 570,507 449,234
--------- ---------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES:
COMPANY OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST HOLDING
SOLELY DEBENTURES OF COMPANY ......................... -- 98,905
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
PREFERRED STOCK, $.01 PAR VALUE,
10,000,000 SHARES AUTHORIZED,
NONE ISSUED AND OUTSTANDING .......................
COMMON STOCK, NO PAR VALUE, 50,000,000 SHARES
AUTHORIZED, 17,851,595 AND 13,431,408 SHARES ISSUED
AND OUTSTANDING ................................... 152,740 46,582
NOTES RECEIVABLE FROM SHAREHOLDERS ................... (2,822) (2,287)
ACCUMULATED OTHER COMPREHENSIVE INCOME ............... 13,185 13,494
RETAINED EARNINGS .................................... 145,958 124,536
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ...................... 309,061 182,325
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $ 879,568 $ 730,464
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
3
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------------- --------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
REVENUE:
NET WRITTEN PREMIUMS ...................... $ 96,198 $ 73,711 $ 255,821 $ 191,523
CHANGE IN NET UNEARNED PREMIUMS
(INCREASE) ............................. (18,443) (14,440) (39,840) (29,334)
------------ ------------ ------------ ------------
NET EARNED PREMIUMS ....................... 77,755 59,271 215,981 162,189
NET INVESTMENT INCOME ..................... 8,238 6,030 24,371 18,126
NET REALIZED INVESTMENT GAIN .............. 488 3,556 3,105 4,038
OTHER INCOME .............................. 105 2,268 221 7,525
------------ ------------ ------------ ------------
TOTAL REVENUE ........................... 86,586 71,125 243,678 191,878
------------ ------------ ------------ ------------
LOSSES AND EXPENSES:
LOSS AND LOSS ADJUSTMENT EXPENSES ......... 59,109 50,957 159,333 129,098
NET REINSURANCE RECOVERIES ................ (8,469) (16,987) (26,675) (34,915)
------------ ------------ ------------ ------------
NET LOSS AND LOSS ADJUSTMENT EXPENSES ..... 50,640 33,970 132,658 94,183
ACQUISITION COSTS AND OTHER
UNDERWRITING EXPENSES ................ 25,880 19,532 71,043 53,568
OTHER OPERATING EXPENSES .................. 974 3,721 5,136 9,962
------------ ------------ ------------ ------------
TOTAL LOSSES AND EXPENSES ............... 77,494 57,223 208,837 157,713
------------ ------------ ------------ ------------
MINORITY INTEREST: DISTRIBUTIONS ON
COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST ............................. -- 1,811 2,749 5,434
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ................... 9,092 12,091 32,092 28,731
------------ ------------ ------------ ------------
INCOME TAX EXPENSE (BENEFIT):
CURRENT ................................... 3,571 3,129 14,269 10,196
DEFERRED .................................. (451) 834 (3,599) (1,060)
------------ ------------ ------------ ------------
TOTAL INCOME TAX EXPENSE ................ 3,120 3,963 10,670 9,136
------------ ------------ ------------ ------------
NET INCOME .............................. $ 5,972 $ 8,128 $ 21,422 $ 19,595
============ ============ ============ ============
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
HOLDING GAIN ARISING DURING PERIOD ........ 3,221 2,090 1,709 4,654
RECLASSIFICATION ADJUSTMENT ............... (317) (2,311) (2,018) (2,625)
------------ ------------ ------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS) ......... 2,904 (221) (309) 2,029
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME ......................... $ 8,876 $ 7,907 $ 21,113 $ 21,624
============ ============ ============ ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE .................. $ 0.34 $ 0.69 $ 1.37 $ 1.62
============ ============ ============ ============
DILUTED EARNINGS PER SHARE ................ $ 0.32 $ 0.56 $ 1.31 $ 1.34
============ ============ ============ ============
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING ............................... 17,808,317 11,825,698 15,645,956 12,090,905
WEIGHTED-AVERAGE SHARE EQUIVALENTS
OUTSTANDING ............................... 704,534 2,603,161 766,746 2,550,705
------------ ------------ ------------ ------------
WEIGHTED-AVERAGE SHARES AND SHARE
EQUIVALENTS OUTSTANDING ................... 18,512,851 14,428,859 16,412,702 14,641,610
============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
4
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
For the Nine Months For the Year Ended
Ended September 30, December 31,
2001 2000
------------------- ------------------
(Unaudited)
COMMON STOCK:
BALANCE AT BEGINNING OF YEAR ................ $ 46,582 $ 68,859
ISSUANCE OF SHARES PURSUANT TO STOCK
PURCHASE CONTRACTS ........................ 98,905
EXERCISE OF EMPLOYEE STOCK OPTIONS .......... 6,113 (23,132)
NET ISSUANCE OF SHARES PURSUANT TO STOCK
PURCHASE PLANS ............................ 1,140 855
--------- ---------
BALANCE AT END OF PERIOD ................ 152,740 46,582
--------- ---------
NOTES RECEIVABLE FROM SHAREHOLDERS:
BALANCE AT BEGINNING OF PERIOD .............. (2,287) (2,506)
NOTES RECEIVABLE ISSUED PURSUANT
TO STOCK PURCHASE PLAN .................... (1,243) (414)
COLLECTION OF NOTES RECEIVABLE .............. 708 633
--------- ---------
BALANCE AT END OF PERIOD ................ (2,822) (2,287)
--------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
BALANCE AT BEGINNING OF PERIOD .............. 13,494 13,507
OTHER COMPREHENSIVE LOSS, NET OF TAXES ...... (309) (13)
--------- ---------
BALANCE AT END OF PERIOD ................ 13,185 13,494
--------- ---------
RETAINED EARNINGS:
BALANCE AT BEGINNING OF PERIOD .............. 124,536 93,766
NET INCOME .................................. 21,422 30,770
--------- ---------
BALANCE AT END OF PERIOD ................ 145,958 124,536
--------- ---------
COMMON STOCK HELD IN TREASURY:
BALANCE AT BEGINNING OF PERIOD .............. (12,186)
COMMON SHARES REPURCHASED ................... (40,766)
EXERCISE OF EMPLOYEE STOCK OPTIONS .......... 52,712
ISSUANCE OF SHARES PURSUANT TO EMPLOYEE STOCK
PURCHASE PLAN ............................. 240
--------- ---------
BALANCE AT END OF PERIOD ................ -- --
--------- ---------
TOTAL SHAREHOLDERS' EQUITY .............. $ 309,061 $ 182,325
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
5
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
For the Nine Months Ended September 30,
---------------------------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME ........................................... $ 21,422 $ 19,595
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
NET REALIZED INVESTMENT GAIN ......................... (3,105) (4,038)
DEPRECIATION AND AMORTIZATION EXPENSE ................ 1,967 2,844
DEFERRED INCOME TAX BENEFIT .......................... (3,599) (1,060)
CHANGE IN PREMIUMS RECEIVABLE ........................ (28,930) (18,639)
CHANGE IN OTHER RECEIVABLES .......................... (24,482) (19,878)
CHANGE IN INCOME TAXES RECOVERABLE ................... (9,219)
CHANGE IN DEFERRED ACQUISITION COSTS ................. (8,631) (7,107)
CHANGE IN OTHER ASSETS ............................... 1,054 557
CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT
EXPENSES ........................................... 49,293 38,617
CHANGE IN UNEARNED PREMIUMS .......................... 54,705 32,179
CHANGE IN OTHER LIABILITIES .......................... 12,935 2,620
TAX BENEFIT FROM EXERCISE OF EMPLOYEE
STOCK OPTIONS ...................................... 25,607 81
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...... 89,017 45,771
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF INVESTMENTS IN FIXED
MATURITIES ....................................... 27,063 94,560
PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED
MATURITIES ....................................... 47,099 22,900
PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY
SECURITIES ....................................... 12,603 34,242
COST OF FIXED MATURITIES ACQUIRED .................... (178,611) (166,449)
COST OF EQUITY SECURITIES ACQUIRED ................... (11,691) (22,394)
PURCHASE OF PROPERTY AND EQUIPMENT ................... (1,385) (2,701)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES ............ (104,922) (39,842)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
REPAYMENTS ON LOANS PAYABLE .......................... (22,000)
PROCEEDS FROM LOANS PAYABLE .......................... 29,841
EXERCISE OF EMPLOYEE STOCK OPTIONS ................... 2,911 43
COLLECTION OF NOTES RECEIVABLE ....................... 708 480
PROCEEDS FROM SHARES ISSUED PURSUANT TO
STOCK PURCHASE PLANS ............................... 33 182
COST OF COMMON STOCK REPURCHASED ..................... (12,692)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 11,493 (11,987)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............... (4,412) (6,058)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........ 49,742 26,230
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 45,330 $ 20,172
========= =========
CASH PAID DURING THE PERIOD FOR:
INCOME TAXES ......................................... $ 5,435 $ 7,760
INTEREST ............................................. $ 130
NON-CASH TRANSACTIONS:
ISSUANCE OF SHARES (FORFEITURES) PURSUANT TO
EMPLOYEE STOCK PURCHASE PLAN IN EXCHANGE FOR
NOTES RECEIVABLE ................................... $ 1,243 $ (380)
ISSUANCE OF COMMON SHARES IN SATISFACTION OF
STOCK PURCHASE CONTRACTS ........................... $ 98,905
The accompanying notes are an integral part of the consolidated financial
statements.
6
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements as of and for the three and nine
months ended September 30, 2001 and 2000 are unaudited, but in the opinion
of management, have been prepared on the same basis as the annual audited
consolidated financial statements and reflect all adjustments, consisting
of only normal recurring accruals, necessary for a fair statement of the
information set forth therein. The results of operations for the nine
months ended September 30, 2001 are not necessarily indicative of the
operating results to be expected for the full year or any other period.
Certain prior year amounts have been reclassified for comparative purposes.
These financial statements should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K
as of and for the year ended December 31, 2000.
2. Investments
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities" on January 1, 2001. The provisions of SFAS 133 require,
among other things, that all derivatives be recognized in the consolidated
balance sheets as either assets or liabilities and measured at fair value.
The corresponding derivative gains and losses should be reported based upon
the hedge relationship, if such a relationship exists. Changes in the fair
value of derivatives that are not designated as hedges or that do not meet
the hedge accounting criteria in SFAS 133 are required to be reported in
income. On January 1, 2001 and at September 30, 2001, the Company held no
derivative financial instruments nor embedded financial derivatives.
In November 2000, the Emerging Issues Task Force of the Financial
Accounting Standards Board ("FASB") reached a consensus on impairment
accounting for retained beneficial interests ("EITF 99-20"). Under this
consensus, impairment on certain beneficial interests in securitized assets
must be recognized when (1) the assets fair value is below its carrying
value, and (2) there has been an adverse change in estimated cash flows.
Previously, impairment on such assets was recognized when the asset's
carrying value exceeded estimated cash flows discounted at a risk free rate
of return. The adoption of EITF 99-20 on April 1, 2001 by the Company had
an immaterial effect on earnings and financial position. During 2001
certain structured securities were subject to re-evaluation under EITF
99-20 as a result of an adverse change in estimated cash flows due to
credit rating downgrades. This re-evaluation resulted in non-cash realized
investment losses of $4.3 million in the quarter ended June 30, 2001.
3. Goodwill
Goodwill amounted to $26.2 million at September 30, 2001. Goodwill is being
amortized on a straight line basis over 20 years. The carrying value of
goodwill is reviewed for recoverability based on the undiscounted cash
flows of the businesses acquired. Should the review indicate that goodwill
is not recoverable, the Company would recognize an impairment loss. During
2001 goodwill was decreased $3.5 million based upon the Company's current
reduced estimate of the contingent additional purchase price for the
Liberty acquisition. The effect of this transaction had no impact on
operations for 2001.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 eliminates the practice of amortizing goodwill
through periodic charges to earnings and establishes a new methodology for
recognizing and measuring goodwill and other intangible assets. Under this
new accounting standard, the Company will cease goodwill amortization on
January 1, 2002. Goodwill amortization for the year ended December 31, 2001
is anticipated to amount to approximately $1.7 million. The Company will
also review goodwill and other intangible assets for any impairment or
other effects of the new standard.
7
4. September 11, 2001 Terrorist Attacks
The Company has exposure to the September 11, 2001 terrorist attacks with
claims expected to arise mainly from its business interruption, business
personal property, business property, and workers' compensation insurance
coverages. The Company has performed a detailed analysis of contracts it
believes are exposed to this event. The Company estimates losses incurred
of $4.0 million, net of reinsurance recoveries, based on preliminary
reports and estimates of loss and damage. The Company estimates ceded
reinsurance coverage of $0.5 million. While this is management's best
estimate at this time, it could change as more information becomes
available. Management does not believe that there will be any
collectibility issues with respect to its $0.5 million of ceded losses.
5. Loans Payable
As of September 30, 2001, the Company had aggregate borrowings of $29.8
million from the Federal Home Loan Bank. These borrowings bear interest at
adjusted LIBOR and mature twelve months from inception. The proceeds from
these borrowings were invested in collateralized mortgage obligation and
asset backed securities to achieve a positive spread between the rate of
interest on these securities and the borrowing rates.
6. Shareholders' Equity
On May 16, 2001, the Company issued 3.9 million common shares to satisfy
the stock purchase contract obligation from the Company's 1998 FELINE
PRIDES(SM) offering. The issuance of such shares resulted in a $98.9
million increase in Shareholders' Equity and a corresponding decrease in
the Minority Interest In Consolidated Subsidiaries balance.
7. Earnings Per Share
Earnings per common share has been calculated by dividing net income for
the period by the weighted average number of common shares and common share
equivalents outstanding during the period. Following is the computation of
earnings per share for the three and nine months ended September 30, 2001
and 2000, respectively (in thousands):
As of and For the Three As of and For the Nine
Months Ended September 30, Months Ended September 30
-------------------------- -------------------------
2001 2000 2001 2000
------- ------- ------- -------
Weighted-Average Common Shares Outstanding 17,808 11,826 15,646 12,091
Weighted-Average Share Equivalents Outstanding 705 2,603 767 2,551
------- ------- ------- -------
Weighted-Average Shares and Share
Equivalents Outstanding 18,513 14,429 16,413 14,642
======= ======= ======= =======
Net Income $ 5,972 $ 8,128 $21,422 $19,595
======= ======= ======= =======
Basic Earnings per Share $ 0.34 $ 0.69 $ 1.37 $ 1.62
======= ======= ======= =======
Diluted Earnings per Share $ 0.32 $ 0.56 $ 1.31 $ 1.34
======= ======= ======= =======
8
8. Income Taxes
The effective tax rate differs from the 35% marginal tax rate principally
as a result of interest exempt from tax, the dividend received deduction
and other differences in the recognition of revenues and expenses for tax
and financial reporting purposes.
9. Comprehensive Income
Components of comprehensive income, as detailed in the Consolidated
Statements of Operations and Comprehensive Income, are net of tax. The
related tax effect of Holding Gains arising during the three and nine
months ended September 30, 2001 and 2000 was $1.7 million and $1.1 million,
respectively, and $0.9 million and $2.5 million, respectively. The related
tax effect of Reclassification Adjustments for the three and nine months
ended September 30, 2001 and 2000 was ($0.2) million and ($1.2) million,
respectively, and ($1.1) million and ($1.4) million, respectively.
10. Segment Information
The Company's operations are classified into three reportable business
segments: The Commercial Lines Underwriting Group which has underwriting
responsibility for the Commercial Automobile and Commercial Property and
Commercial multi-peril package insurance products; the Specialty Lines
Underwriting Group which has underwriting responsibility for the
professional liability insurance products; and the Personal Lines Group
which designs, markets and underwrites personal property and casualty
insurance products for the Manufactured Housing and Homeowners markets.
Effective June 30, 2000, due to a change in market focus, the previously
reported Specialty Property Underwriting Group segment was restructured
resulting in the combination of this Underwriting Group with the Commercial
Lines Underwriting Group. Accordingly, prior information has been
reclassified to reflect this change. The reportable segments operate solely
within the United States. The segments follow the same accounting policies
used for the Company's consolidated financial statements. Management
evaluates a segment's performance based upon underwriting results.
Following is a tabulation of business segment information for the nine and
three months ended September 30, 2001 and 2000. Corporate information is
included to reconcile segment data to the consolidated financial statements
(in thousands):
9
Nine Months Ended,
----------------------------------------------------------------------------
Commercial Specialty Personal
Lines Lines Lines Corporate Total
---------- ---------- --------- --------- ---------
September 30, 2001:
Gross Written Premiums $ 236,795 $ 60,699 $ 64,406 $ 361,900
---------- ---------- --------- --------- ---------
Net Written Premiums $ 167,088 $ 53,465 $ 35,268 $ 255,821
---------- ---------- --------- --------- ---------
Revenue:
Net Earned Premiums $ 137,106 $ 50,060 $ 28,815 $ 215,981
Net Investment Income 24,371 24,371
Net Realized Investment Gain 3,105 3,105
Other Income 2,189 (1,968) 221
---------- ---------- --------- --------- ---------
Total Revenue 137,106 50,060 31,004 25,508 243,678
---------- ---------- --------- --------- ---------
Losses and Expenses:
Net Loss and Loss Adjustment Expenses 86,551 31,458 14,649 132,658
Acquisition Costs and Other Underwriting
Expenses 71,043 71,043
Other Operating Expenses 1,162 3,974 5,136
---------- ---------- --------- --------- ---------
Total Losses and Expenses 86,551 31,458 15,811 75,017 208,837
---------- ---------- --------- --------- ---------
Minority Interest: Distributions on Company
Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust 2,749 2,749
---------- ---------- --------- --------- ---------
Income Before Income Taxes 50,555 18,602 15,193 (52,258) 32,092
Total Income Tax Expense 10,670 10,670
---------- ---------- --------- --------- ---------
Net Income $ 50,555 $ 18,602 $ 15,193 $ (62,928) $ 21,422
========== ========== ========= ========= =========
Total Assets $ 174,652 $ 704,916 $ 879,568
========== ========== ========= ========= =========
September 30, 2000:
Gross Written Premiums $ 178,308 $ 51,691 $ 41,111 $ 271,110
---------- ---------- --------- --------- ---------
Net Written Premiums $ 118,184 $ 51,945 $ 21,394 $ 191,523
---------- ---------- --------- --------- ---------
Revenue:
Net Earned Premiums $ 101,501 $ 40,603 $ 20,085 $ 162,189
Net Investment Income 18,126 18,126
Net Realized Investment Gain 4,038 4,038
Other Income 14,953 (7,428) 7,525
---------- ---------- --------- --------- ---------
Total Revenue 101,501 40,603 35,038 14,736 191,878
---------- ---------- --------- --------- ---------
Losses and Expenses:
Net Loss and Loss Adjustment Expenses 59,242 25,438 9,503 94,183
Acquisition Costs and Other Underwriting
Expenses 53,568 53,568
Other Operating Expenses 11,863 (1,901) 9,962
---------- ---------- --------- --------- ---------
Total Losses and Expenses 59,242 25,438 21,366 51,667 157,713
---------- ---------- --------- --------- ---------
Minority Interest: Distributions on Company
Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust 5,434 5,434
---------- ---------- --------- --------- ---------
Income Before Income Taxes 42,259 15,165 13,672 (42,365) 28,731
Total Income Tax Expense 9,136 9,136
---------- ---------- --------- --------- ---------
Net Income $ 42,259 $ 15,165 $ 13,672 $ (51,501) $ 19,595
========== ========== ========= ========= =========
Total Assets $ 145,153 $ 537,034 $ 682,187
========== ========== ========= ========= =========
10
Three Months Ended,
----------------------------------------------------------------------------
Commercial Specialty Personal
Lines Lines Lines Corporate Total
---------- ---------- --------- --------- ---------
September 30, 2001:
Gross Written Premiums $ 101,206 $ 19,101 $ 16,886 $ 137,193
---------- ---------- --------- --------- ---------
Net Written Premiums $ 72,782 $ 16,733 $ 6,683 $ 96,198
---------- ---------- --------- --------- ---------
Revenue:
Net Earned Premiums $ 51,028 $ 17,350 $ 9,377 $ 77,755
Net Investment Income 8,238 8,238
Net Realized Investment Gain 488 488
Other Income 591 (486) 105
---------- ---------- --------- --------- ---------
Total Revenue 51,028 17,350 9,968 8,240 86,586
---------- ---------- --------- --------- ---------
Losses and Expenses:
Net Loss and Loss Adjustment Expenses 35,040 10,854 4,746 50,640
Acquisition Costs and Other Underwriting
Expenses 25,880 25,880
Other Operating Expenses 384 590 974
---------- ---------- --------- --------- ---------
Total Losses and Expenses 35,040 10,854 5,130 26,470 77,494
---------- ---------- --------- --------- ---------
Income Before Income Taxes 15,988 6,496 4,838 (18,230) 9,092
Total Income Tax Expense 3,120 3,120
---------- ---------- --------- --------- ---------
Net Income $ 15,988 $ 6,496 $ 4,838 $ (21,350) $ 5,972
========== ========== ========= ========= =========
Total Assets $ 174,652 $ 704,916 $ 879,568
========== ========== ========= ========= =========
September 30, 2000:
Gross Written Premiums $ 74,446 $ 18,094 $ 11,582 $ 104,122
---------- ---------- --------- --------- ---------
Net Written Premiums $ 51,536 $ 17,277 $ 4,898 $ 73,711
---------- ---------- --------- --------- ---------
Revenue:
Net Earned Premiums $ 37,028 $ 15,255 $ 6,988 $ 59,271
Net Investment Income 6,030 6,030
Net Realized Investment Gain 3,556 3,556
Other Income 4,151 (1,883) 2,268
---------- ---------- --------- --------- ---------
Total Revenue 37,028 15,255 11,139 7,703 71,125
---------- ---------- --------- --------- ---------
Losses and Expenses:
Net Loss and Loss Adjustment Expenses 21,666 9,546 2,758 33,970
Acquisition Costs and Other Underwriting
Expenses 19,532 19,532
Other Operating Expenses 3,875 (154) 3,721
---------- ---------- --------- --------- ---------
Total Losses and Expenses 21,666 9,546 6,633 19,378 57,223
---------- ---------- --------- --------- ---------
Minority Interest: Distributions on Company
Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust 1,811 1,811
---------- ---------- --------- --------- ---------
Income Before Income Taxes 15,362 5,709 4,506 (13,486) 12,091
Total Income Tax Expense 3,963 3,963
---------- ---------- --------- --------- ---------
Net Income $ 15,362 $ 5,709 $ 4,506 $ (17,449) $ 8,128
========== ========== ========= ========= =========
Total Assets $ 145,153 $ 537,034 $ 682,187
========== ========== ========= ========= =========
11
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Although the Company's financial performance is dependent upon its own specific
business characteristics, certain risk factors can affect the profitability of
the Company. These include:
- Industry factors - Historically the financial performance of the property
and casualty insurance industry has tended to fluctuate in cyclical
patterns of soft markets followed by hard markets. The Company's strategy
is to focus on underwriting profits and accordingly the Company's marketing
organization is being directed into those niche businesses that exhibit the
greatest potential for underwriting profits.
- Competition - The Company competes in the property and casualty business
with other domestic and international insurers having greater financial and
other resources than the Company.
- Regulation - The Company's insurance subsidiaries are subject to a
substantial degree of regulatory oversight, which generally is designed to
protect the interests of policyholders, as opposed to shareholders.
- Inflation - Property and casualty insurance premiums are established before
the amount of losses and loss adjustment expenses, or the extent to which
inflation may effect such amounts is known.
- Investment Risk - Substantial future increases in interest rates could
result in a decline in the market value of the Company's investment
portfolio and resulting losses and/or reduction in shareholders' equity.
- Catastrophe Exposure - The Company's insurance subsidiaries issue insurance
policies which provide coverage for commercial and personal property and
casualty risks. It is possible that a catastrophic event could greatly
increase claims under the insurance policies the insurance subsidiaries
issue. Catastrophes may result from a variety of events or conditions,
including hurricanes, windstorms, earthquakes, hail and other severe
weather conditions and may include terrorist events such as the attacks on
the World Trade Center and Pentagon on September 11, 2001. It is possible
that a catastrophic event could adversely impact profitability.
RESULTS OF OPERATIONS (NINE MONTHS ENDED SEPTEMBER 30, 2001 VS SEPTEMBER 30,
2000)
Premiums: Gross written premiums grew $90.8 million (33.5%) to $361.9
million for the nine months ended September 30, 2001 from $271.1 million for the
same period of 2000; gross earned premiums grew $67.9 million (28.4%) to $307.0
million for the nine months ended September 30, 2001 from $239.1 million for the
same period of 2000; net written premiums increased $64.3 million (33.6%) to
$255.8 million for the nine months ended September 30, 2001 from $191.5 million
for the same period of 2000; and net earned premiums grew $53.8 million (33.2%)
to $216.0 million in 2001 from $162.2 million in 2000.
The respective gross written premium increases for commercial lines, specialty
lines and personal lines segments for the nine months ended September 30, 2001
vs. September 30, 2000 amount to $58.5 million (32.8%), $9.0 million (17.4%) and
$23.3 million (56.7%), respectively. The overall growth in gross written
premiums is primarily attributable to the following:
- Rating downgrades of certain major competitor property and casualty
insurance companies have led to their diminished presence in the Company's
commercial and specialty lines business segments and continue to result in
additional prospects and increased premium writings most notably for the
Company's various commercial package and non-profit D&O product lines
within these segments, respectively.
- The consolidation of certain competitor property and casualty insurance
companies has led to the displacement of certain of their independent
agency relationships. This consolidation continues to result in new agency
relationships for the Company. These relationships have resulted in
additional prospects and premium writings for the Company's commercial and
specialty lines segments.
- Continued expansion of marketing efforts relating to commercial lines and
specialty lines products through the Company's field organization and
preferred agents.
12
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- Rate increases on renewal business.
- The growth in the personal lines segment, resulting in an increase of $23.3
million in gross manufactured housing, preferred homeowners and National
Flood Insurance Program written premiums.
The respective net written premium increases for commercial lines, specialty
lines and personal lines segments for the nine months ended September 30, 2001
vs. September 30, 2000 amount to $48.9 million (41.4%), $1.5 million (2.9%) and
$13.9 million (64.9%), respectively. The differing percentage increases in net
written premiums versus gross written premiums for the period is primarily due
to the various changes in the Company's reinsurance programs.
Net Investment Income: Net investment income was $24.4 million for the nine
months ended September 30, 2001 and $18.1 million for the same period of 2000.
Total investments grew to $543.6 million at September 30, 2001 from $437.8
million at September 30, 2000. The growth in investment income is primarily due
to investing net cash flows provided from operating activities and the relative
percentage increase in taxable investments versus tax exempt investments.
Net Realized Investment Gain: Net realized investment gains were $3.1
million for the nine months ended September 30, 2001 and $4.0 million for the
same period in 2000. The Company realized net investment gains of $5.9 million
from the sales of common stock equity securities and $1.5 million from the sales
of fixed maturity securities during the nine months ended September 30, 2001.
These realized net investment gains were offset by $4.3 million in non-cash
realized investment losses experienced on certain structured securities as a
result of an impairment evaluation in accordance with the recent EITF 99-20
guidance. The proceeds from the sales are being reinvested in fixed maturity
securities to increase current investment income, and decrease the overall
percentage of investments in common stock securities. The net realized
investment gains of $4.0 million for the nine months ended September 30, 2000
were due to sales of certain equity investments which resulted in realized net
investment gains amounting to $7.0 million, which were offset by $3.0 million of
realized net investment losses from sales of certain fixed income securities.
The proceeds from these sales were reinvested principally in fixed maturity
securities.
Other Income: Other income approximated $0.2 million for the nine months
ended September 30, 2001 and $7.5 million for the same period of 2000. Other
income primarily consists of commissions earned on brokered personal lines
business. Such commissions earned continue to decrease as brokering activities
are lessened in favor of writing business directly.
Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $38.5 million (40.9%) to $132.7 million for the nine months
ended September 30, 2001 from $94.2 million for the same period of 2000 and the
loss ratio increased to 61.4% in 2001 from 58.1% in 2000. The nine months ended
September 30, 2001 included a $4.0 million increase to unpaid loss and loss
adjustment expenses arising from business interruption, business personal
property, business property and workers' compensation exposures relating to the
September 11, 2001 terrorist attacks. Excluding this item, net loss and loss
adjustment expenses increased by $34.5 million (36.6%). The increase in net loss
and loss adjustment expenses was due principally to the 33.2% growth in net
earned premiums and to a lesser extent to product mix changes.
Acquisition Costs and Other Underwriting Expenses: Acquisition costs and
other underwriting expenses increased $17.4 million (32.5%) to $71.0 million for
the nine months ended September 30, 2001 from $53.6 million for the same period
of 2000. This increase was due primarily to the 33.2% growth in net earned
premiums, offset by relative changes in the Company's product mix and associated
distribution channel expense.
Other Operating Expenses: Other operating expenses decreased $4.9 million
to $5.1 million for the nine months ended September 30, 2001 from $10.0 million
for the same period of 2000. The decrease in other operating expenses was
primarily due to the decrease in brokering activities resulting in a decrease in
the amount of broker commissions (see Results of Operations "Other Income").
Income Tax Expense: The Company's effective tax rate for the nine months
ended September 30, 2001 and 2000 was 33.2% and 31.8%, respectively. The
effective rates differed from the 35% statutory rate principally due to
13
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
investments in tax-exempt securities offset in part by non-deductible goodwill
amortization. The increase in the effective tax rate is principally due to a
greater investment of cash flows in taxable securities relative to tax-exempt
securities.
RESULTS OF OPERATIONS (THREE MONTHS ENDED SEPTEMBER 30, 2001 VS SEPTEMBER 30,
2000)
Premiums: Gross written premiums grew $33.1 million (31.8%) to $137.2
million for the three months ended September 30, 2001 from $104.1 million for
the same period of 2000; gross earned premiums grew $27.2 million (31.1%) to
$114.6 million for the three months ended September 30, 2001 from $87.4 million
for the same period of 2000; net written premiums increased $22.5 million
(30.5%) to $96.2 million for the three months ended September 30, 2001 from
$73.7 million for the same period of 2000; and net earned premiums grew $18.5
million (31.2%) to $77.8 million in 2001 from $59.3 million in 2000.
The respective gross written premium increases for commercial lines, specialty
lines and personal lines segments for the three months ended September 30, 2001
vs. September 30, 2000 amount to $26.8 million (35.9%), $1.0 million (5.6%) and
$5.3 million (45.8%), respectively. The overall growth in gross written premiums
is primarily attributable to the following:
- Rating downgrades of certain major competitor property and casualty
insurance companies have led to their diminished presence in the Company's
commercial and specialty lines business segments and continue to result in
additional prospects and increased premium writings most notably for the
Company's various commercial package and non-profit D&O product lines
within these segments, respectively.
- The consolidation of certain competitor property and casualty insurance
companies has led to the displacement of certain of their independent
agency relationships which continues to result in new agency relationships
for the Company which have been bringing additional prospects and premium
writings for the Company's commercial and specialty lines segments.
- Continued expansion of marketing efforts relating to commercial lines and
specialty lines products through the Company's field organization and
preferred agents.
- Rate increases on renewal business.
- The growth in the personal lines segment, resulting in an increase of $5.3
million in gross manufactured housing, preferred homeowners and National
Flood Insurance Program written premiums.
The respective net written premium increases (decreases) for commercial lines,
specialty lines and personal lines segments for the three months ended September
30, 2001 vs. September 30, 2000 amount to $21.2 million (41.2%), $(0.5) million
(3.1%) and $1.8 million (36.4%), respectively. The differing percentage
increases in net written premiums versus gross written premiums for the period
is primarily due to the various changes in the Company's reinsurance programs.
The decrease in net written premium for the specialty lines segment is
principally due to the run-off of the insurance agents E&O product line and the
reunderwriting of certain other professional liability products.
Net Investment Income: Net investment income was $8.2 million for the three
months ended September 30, 2001 and $6.0 million for the same period of 2000.
Total investments grew to $543.6 million at September 30, 2001 from $437.8
million at September 30, 2000. The growth in investment income is due to
investing net cash flows provided from operating activities and the relative
percentage increase in taxable investments versus tax exempt investments.
Net Realized Investment Gain: Net realized investment gains were $0.5
million for the three months ended September 30, 2001 and $3.6 million for the
same period in 2000. The net realized investment gains of $0.5 million for the
three months ended September 30, 2001 were due to sales of certain fixed income
securities. The net realized investment gains of $3.6 million for the three
months ended September 30, 2000 were due to sales of certain equity investments
which resulted in realized net investment gains amounting to $5.5 million, which
were offset by $1.9 million of realized net investment losses from sales of
certain fixed income securities. The proceeds from these sales were reinvested
principally in fixed maturity securities.
14
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Other Income: Other income approximated $0.1 million for the three months
ended September 30, 2001 and $2.3 million for the same period of 2000. Other
income primarily consists of commissions earned on brokered personal lines
business. Such commissions earned continue to decrease as brokering activities
are lessened in favor of writing business directly.
Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $16.6 million (48.8%) to $50.6 million for the three months
ended September 30, 2001 from $34.0 million for the same period of 2000 and the
loss ratio increased to 65.1% in 2001 from 57.3% in 2000. The three months ended
September 30, 2001 included a $4.0 million increase to unpaid loss and loss
adjustment expenses arising from business interruption, business personal
property, business property and workers' compensation exposures relating to the
September 11, 2001 terrorist attacks. Excluding this item, net loss and loss
adjustment expenses increased by $12.6 million (37.1%). This increase in net
loss and loss adjustment expenses was due principally to the 31.2% growth in net
earned premiums and to a lesser extent to product mix changes.
Acquisition Costs and Other Underwriting Expenses: Acquisition costs and
other underwriting expenses increased $6.4 million (32.8%) to $25.9 million for
the three months ended September 30, 2001 from $19.5 million for the same period
of 2000. This increase was due primarily to the 31.2% growth in net earned
premiums.
Other Operating Expenses: Other operating expenses decreased $2.7 million
to $1.0 million for the three months ended September 30, 2001 from $3.7 million
for the same period of 2000. The decrease in other operating expenses was
primarily due to the decrease in brokering activities resulting in a decrease in
the amount of broker commissions (see Results of Operations "Other Income").
Income Tax Expense: The Company's effective tax rate for the three months
ended September 30, 2001 and 2000 was 34.3% and 32.8%, respectively. The
effective rates differed from the 35% statutory rate principally due to
investments in tax-exempt securities offset in part by non-deductible goodwill
amortization. The increase in the effective tax rate is principally due to a
greater investment of cash flows in taxable securities relative to tax-exempt
securities.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2001 the Company's investments
experienced unrealized investment depreciation of $0.3 million, net of the
related deferred tax benefit of $0.2 million. At September 30, 2001, the Company
had total investments with a carrying value of $543.6 million, of which 93.2%
consisted of investments in investment grade fixed maturity securities,
including U.S. treasury securities and obligations of U.S. government
corporations and agencies, obligations of states and political subdivisions,
corporate debt securities, collateralized mortgage securities and asset backed
securities. The remaining 6.8% of the Company's total investments consisted
primarily of publicly traded common stock securities.
On September 14, 2001, the Company's Board of Directors authorized the
repurchase of an additional $15.0 million of the Company's common stock. This
authorization is in addition to the previously announced $30.0 million common
stock buyback authorization, bringing the total current remaining authorization
to $17.0 million. The purchases are made from time to time in the open market or
through privately negotiated transactions.
The Company produced net cash from operations of $89.0 million and $45.8
million, respectively, for the nine months ended September 30, 2001 and 2000.
Management believes that the Company has adequate ability to pay all claims and
meet all other cash needs.
During 2000 two of the Company's Insurance Subsidiaries were approved for
membership in the Federal Home Loan Bank ("FHLB"). A primary advantage of FHLB
membership is the ability for members to access credit products from a reliable
capital markets provider. The availability of any one member's access to credit
is based upon its FHLB eligible collateral. At September 30, 2001 the Company's
borrowing capacity was $52.7 million. The Company anticipates utilizing a
portion of its borrowing capacity to purchase a diversified portfolio in
15
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
investment grade floating rate securities in the capital markets funded by
floating rate FHLB borrowings to achieve a positive spread between the rate of
interest on these securities and borrowing rates. The remaining borrowing
capacity will provide an immediately available line of credit. Borrowings
aggregated $29.8 million at September 30, 2001 and bear interest at adjusted
LIBOR and mature twelve months from inception.
Risk-based capital is designed to measure the acceptable amount of capital
an insurer should have based on the inherent specific risks of each insurer.
Insurers failing to meet this benchmark capital level may be subject to scrutiny
by the insurer's domiciliary insurance department and ultimately rehabilitation
or liquidation. Based on the standards currently adopted, the Company's
insurance subsidiaries' capital and surplus is significantly in excess of the
prescribed risk-based capital requirements.
NEW ACCOUNTING PRONOUNCEMENT
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 eliminates the practice of amortizing goodwill through
periodic charges to earnings and establishes a new methodology for recognizing
and measuring goodwill and other intangible assets. Under this new accounting
standard, the Company will cease goodwill amortization on January 1, 2002.
Goodwill amortization for the year ended December 31, 2001 is anticipated to
amount to approximately $1.7 million. The Company will also review goodwill and
other intangible assets for any impairment or other effects of the new standard.
FORWARD-LOOKING INFORMATION
Certain information included in this report and other statements or
materials published or to be published by the Company are not historical facts
but are forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new and
existing products, expectations for market segment growth, and similar matters.
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) catastrophe losses; and (vi) the amount of time and extent of
business interruptions and other losses resulting from the September 11, 2001
terrorist attacks and any future terrorist attacks.
16
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There is no material change to the Quantitative and Qualitative market risk
disclosure from the Company's Form 10-K for the fiscal year ended December 31,
2000.
17
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In connection with the action filed in the U.S. District Court in the
Middle District of Florida by two of the Company's subsidiaries,
Liberty American Insurance Group Inc. and Mobile Homeowners Insurance
Agency Inc., against Westpoint Underwriters LLC, a managing general
agent, two former employees of Liberty American and a third individual
(which action was reported in Item 1 of Part II of the Company's Form
10-Q for the period ended March 31, 2001), a federal magistrate judge
issued a report and recommendations to the Federal District Court on
October 17, 2001. With respect to Liberty American's request for
preliminary relief, the findings and recommendations stated that one of
the former employees had misappropriated Liberty American's trade
secrets by using its software to write WestPoint's software. The Court
recommended against injunctive relief, finding that damages may be
available as a remedy. Liberty American intends to object, in part, to
the findings, specifically with respect to the recommendation against
injunctive relief.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a. Not applicable.
b. The Company filed the following reports on Form 8-K during the
quarterly period ended September 30, 2001:
Date of Report Item Reported
-------------- -------------
July 20, 2001 Supplementary Financial Data for the three and six months ended June 30,
2001 and 2000
September 25, 2001 Estimate of losses resulting from September 11, 2001 terrorist attacks
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHILADELPHIA CONSOLIDATED HOLDING CORP.
---------------------------------------
Registrant
Date November 1, 2001 /s/ James J. Maguire
---------------------- -----------------------------------------
James J. Maguire
Chairman of the Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date November 1, 2001 /s/ Craig P. Keller
---------------------- -----------------------------------------
Craig P. Keller
Senior Vice President, Secretary,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
19