PHILADELPHIA CONSOLIDATED
HOLDING CORP.
FOUNDED
1962
Certain information included in this presentation 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 and 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.
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SUMMARY OF THE OFFERING
Offering Size: 4.0 million shares
Primary: 3.0 million shares
Selling Shareholder: 1.0 million shares
Selling Shareholder: James J. Maguire
Pro Forma Capitalization(1): $453.4 million
Use of Proceeds: Additional capital for our insurance
subsidiaries and general corporate
purposes
Ticker/Listing: PHLY/NASDAQ
Public Offering Price: $33.50 per share
Underwriters: Merrill Lynch & Co. (Bookrunner)
Banc of America Securities
- ----------
(1) Actual September 30, 2001 adjusted for public offering proceeds including
over allotment
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EXPERIENCED AND MOTIVATED MANAGEMENT
Years in
Name Position Age Industry
- ---- -------- --- --------
James J. Maguire Chairman & CEO 68 42
James J. Maguire, Jr. President & COO 41 18
Sean S. Sweeney Executive Vice President 44 22
Craig P. Keller Senior Vice President & CFO 51 16
P. Daniel Eldridge President & CEO-Liberty 46 22
American Group
Christopher J. Maguire Senior Vice President & Chief 37 15
Underwriting Officer
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INVESTMENT HIGHLIGHTS
- Specialty niche commercial and personal lines insurance products
- Mixed marketing platform
- Disciplined underwriter
- Proven product innovator
- Track record of profitable growth
- Strong financial position with clean balance sheet
- A+ rating from A.M. Best
- Substantial price increases present unique profit opportunity
- Financially motivated owner/managers
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A TRACK RECORD OF GROWTH
GROSS WRITTEN PREMIUMS
CAGR 1995-2000 = 28.3%
[BAR CHART]
1995 $104.2
1996 $136.9
1997 $159.1
1998 $197.4
1999 $274.2
2000 $361.9
9 Months Ended 9/30/00 $271.1
9 Months Ended 9/30/01 $361.9
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SUPERIOR UNDERWRITING RESULTS
Statutory Combined Ratios(1)
Strong Reserves: Redundancies in 8 out of last 10 years
[BAR CHART]
PHLY Industry
---- --------
1991 92.8 108.8
1992 95.8 115.7
1993 91.0 106.9
1994 89.4 108.4
1995 86.7 106.4
1996 86.8 105.8
1997 84.4 101.6
1998 85.1 105.6
1999 93.3 107.5
2000 89.1 110.5
- PHLY - Industry
10 YEAR AVERAGE = 89.9% 10 YEAR AVERAGE =107.7%
- ----------
Source: A.M. Best
(1) Statutory combined ratio calculated after policyholder dividends.
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HIGH QUALITY INVESTMENT PORTFOLIO
As of September 30, 2001
[PIE CHART]
Government/Corporate Bonds 28.5
MBS/CMO 12.4
Common Stock 5.2
All Other 1.5
Cash Equivalents 21.5
Municipal Bonds 12.1
Asset Backed Securities 18.8
- Proforma portfolio market value(1) - $692.7mm
- Fixed income securities(2)
- Average lowest rating AA-
- Portfolio duration 3.1 years
- 6.98% taxable equivalent yield
- Quality long-term growth stocks
$692.7 MM
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(1) Actual September 30, 2001 adjusted for $114.5 million of net proceeds from
offering including over allotment
(2) As of September 30, 2001 excluding cash equivalents
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CREATING VALUE FOR SHAREHOLDERS
Book Value Per Share
CAGR 1993-2001 = 20.0%
12/31/93 $ 4.22
12/31/94 $ 4.52
12/31/95 $ 5.88
12/31/96 $ 7.09
12/31/97 $ 9.09
12/31/98 $11.27
12/31/99 $12.82
12/31/00 $13.57
Proforma 9/30/01(2) $19.74
Net Operating Income Per Share
CAGR 1994-2000 = 20.1%
1994 $0.53
1995 $0.71
1996 $0.93
1997 $1.13
1998 $1.32
1999 $1.00
2000 $1.59
9 Months Ended 9/30/00 $1.16
9 Months Ended 9/30/01 $1.34
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(1) Excludes World Trade Center loss of $2.6 million.
(2) Actual September 30, 2001 adjusted for public offering including over
allotment
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CORPORATE PHILOSOPHY
How Do We Do It?
- - Write only profitable accounts through proactive risk selection
- - Don't discount pricing
- - Bonuses paid after EPS achieved
- - No MGA business
- - Maintain monthly price and loss ratio monitor
- - Compensation tied to combined ratio
- - Allocate capital to profitable lines
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INNOVATION HAS CREATED A BALANCED SPREAD OF RISK
GROSS WRITTEN PREMIUM BY LINE
1994
Commercial Automobile 21
Excess Liability 50
Commercial Package 21
Professional Liability 8
2001E
Personal Lines 14
Commercial Automobile 4
Excess Liability 16
Nat'l Flood 3
Commercial Package 41
Professional Liability 17
Specialty Property 5
- - Deploy capital to most profitable products
- - Differentiation through value-added coverage and service
- - Proven product development capability
- - Hard market creates opportunities
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COMMERCIAL PACKAGE
GROSS WRITTEN PREMIUMS
CAGR 1995-2000 = 36.8%
1995 $ 25.1
1996 $ 43.7
1997 $ 60.0
1998 $ 78.1
1999 $ 86.9
2000 $120.4
9 Months Ended 9/30/00 $ 99.9
9 Months Ended 9/30/01 $152.6
- - Market share of 3% of targeted accounts
- - 41.0% of 2001E GWP
- - Targets non-profits, social and human services, health and fitness,
schools, condominiums, manufactured housing parks, homeowners
associations, boat dealers, day care centers, mental health centers
- - General/professional liability, D&O, umbrella, property & auto
- - 25%-30% annual growth potential
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SPECIALTY LINES
GROSS WRITTEN PREMIUMS
CAGR 1995-2000= 51.7%
1995 $ 8.5
1996 $16.6
1997 $20.8
1998 $30.4
1999 $48.5
2000 $68.2
9 Months Ended 9/30/00 $51.7
9 Months Ended 9/30/01 $60.7
- - Market share of 1% of targeted accounts
- - 17.3% of 2001E GWP
- - Targets smaller non-profits and for-profits, lawyers, accountants, and
consultants
- - D&O liability and miscellaneous professional liability coverages
- - Introduced EXECUTIVE SAFEGUARD(SM) policy in 1996
- - 15%-20% annual growth potential
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SPECIALTY PROPERTY AND INLAND MARINE
(Acquired Book of Business)
GROSS WRITTEN PREMIUMS
1999 $21.6
2000 $21.3
9 Months Ended 9/30/00 $17.3
9 Months Ended 9/30/01 $18.4
- - Market share of 1% of targeted accounts
- - 5.0% of 2001E GWP
- - Targets larger, superior property accounts and specific classes of inland
marine
- - Office parks,retail shopping centers, bridges, nursing homes, and hotels
- - Value added in-house loss control
- - 30%-35% annual growth potential
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COMMERCIAL AUTOMOBILE AND EXCESS LIABILITY
GROSS WRITTEN PREMIUMS
CAGR 1995-2000 = 3.4%
1995 $69.2
1996 $74.9
1997 $77.7
1998 $85.7
1999 $89.4
2000 $81.6
9 Months Ended 9/30/00 $60.8
9 Months Ended 9/30/01 $65.3
- - Market share 5% of targeted accounts
- - 18.7% of 2001E GWP
- - Targets leasing, rent-a-car, financial institutions, auto dealers and
credit unions
- - Supplemental liability (invented by PHLY), gap, lessor contingent, and
interim liability
- - 5%-10% annual growth potential
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PERSONAL LINES
(Acquisition of Liberty American)
GROSS WRITTEN PREMIUMS
Manufactured Housing Homeowners
-------------------- ----------
1998 $ 3.8
1999 $17.3 $ 2.8
2000 $37.2 $ 7.0
9 Months Ended 9/30/00 $28.5 $ 4.7
9 Months Ended 9/30/01 $32.7 $21.6
- - Market share of 1%
- - 17.0% of 2001E GWP
- - Manufactured Housing (Homeowners Insurance)
- - Preferred Homeowners Program
- - Flood Insurance
- - 20% annual revenue growth potential
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DIVERSE DISTRIBUTION PLATFORM WILL FACILITATE
ORGANIC GROWTH
36 OFFICES IN 10 REGIONS COVERING THE U.S.
[GRAPHIC OF US MAP WITH REGIONS IDENTIFIED]
Western Region
Sunbelt Region
Rocky Mt. Region
South West Region
Central Region
Personal Lines Division
Southern Region
Home Office/Mid-Atlantic Region
New England Region
Ohio Valley Region
North Central Region
- - Direct sales organization initiates proactive risk selection
- - 6,000 broker relationships
- - Preferred Agents
- - Local underwriting
- - Networked via proprietary software
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DRIVERS OF FUTURE GROWTH
- - Price increases
- - Disruption in the industry
- Insolvencies
- Rating downgrades
- - National presence - 36 offices
- - New product offerings
- - Mixed marketing strategy
- - Experienced management
- - Advanced technology - lower expenses and improved process
- - Underwriting and pricing discipline
- - A+ rating - Flight to quality
- - Preferred agent program - 15% growth
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PHILADELPHIA CONSOLIDATED
HOLDING CORP.
FOUNDED
1962