EX-99.1 2 w41430exv99w1.htm PRESS RELEASE OF 3RD QUARTER RESULTS exv99w1
 

Exhibit 99.1
PHILADELPHIA CONSOLIDATED HOLDING CORP.
THIRD QUARTER RESULTS
SEPTEMBER 30, 2007
OCTOBER 25, 2007 PRESS RELEASE
Bala Cynwyd, PA – Philadelphia Consolidated Holding Corp. (NASDAQ: PHLY) today reported net income for the quarter ended September 30, 2007 increased 7.0% to $96.2 million ($1.30 diluted earnings per share and $1.37 basic earnings per share) from $89.9 million ($1.22 diluted earnings per share and $1.28 basic earnings per share) for the quarter ended September 30, 2006. After-tax net realized investment gains (losses) were $1.8 million of gains ($0.02 diluted earnings per share) for the quarter ended September 30, 2007 versus $(4.5) million of losses ($0.06 diluted loss per share) for the quarter ended September 30, 2006. Gross written premiums for the quarter ended September 30, 2007 increased 10.5% to $504.6 million from $456.6 million for the quarter ended September 30, 2006, and the combined ratio for the quarter ended September 30, 2007 was 68.5% versus 58.6% for the quarter ended September 30, 2006. The Company’s book value per share at September 30, 2007 increased 22.8% to $20.23 from $16.48 at December 31, 2006.
Financial results for the quarter ended September 30, 2007 included:
•   A $39.5 million pre-tax ($25.7 million after-tax, or $0.35 diluted earnings per share) benefit from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years’ claims emergence. This benefit compares to a $42.7 million pre-tax ($27.7 million after-tax, or $0.38 diluted earnings per share) benefit recognized in the third quarter of 2006 from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years’ claims emergence; and a $14.8 million pre-tax ($9.6 million after-tax, or $0.13 diluted earnings per share) benefit recognized in the third quarter of 2006 from the re-evaluation of the 2006 accident year loss ratio based on the favorable development observed in the prior years’ claim emergence.
Net income for the nine months ended September 30, 2007 increased 19.3% to $256.6 million ($3.46 diluted earnings per share and $3.65 basic earnings per share) compared to $215.1 million ($2.94 diluted earnings per share and $3.08 basic earnings per share) for the same period in 2006. After-tax net realized investment gains (losses) were $21.2 million of gains ($0.29 diluted earnings per share) for the nine months ended September 30, 2007 versus $(6.4) million of losses ($0.09 diluted loss per share) for the nine months ended September 30, 2006. Gross written premiums for the nine months ended September 30, 2007 increased 15.2% to $1,297.3 million from $1,126.0 million for the nine months ended September 30, 2006, and the combined ratio for the nine months ended September 30, 2007 was 73.3% compared to 68.3% for the nine months ended September 30, 2006.

 

 

Press Release
October 25, 2007
Page 2
Financial results for the nine months ended September 30, 2007 included:
•   A $73.2 million pre-tax ($47.6 million after-tax, or $0.64 diluted earnings per share) benefit from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years’ claims emergence. This benefit compares to a $78.3 million pre-tax ($50.9 million after-tax, or $0.70 diluted earnings per share) benefit recognized in the nine months ended September 30, 2006 from a decrease in net unpaid loss and loss adjustment expenses due to favorable trends in prior years’ claims emergence.
•   $22.2 million of pre-tax ($14.4 million after-tax, or $0.19 diluted earnings per share) net realized investment gains resulting from the liquidation of one of the Company’s equity security portfolios following the Company’s decision to change one of its equity security investment managers.
James J. Maguire, Jr., CEO, said: “I am very pleased with our results in the wake of an increasingly competitive marketplace. During the quarter, we continued to exercise underwriting and pricing discipline, and risk select the business in our various niches which we believe will be profitable. We renewed in excess of 90% of our quoted commercial business, and saw ample new business opportunities across most product lines. While pricing remained relatively stable for most small to medium sized accounts, larger accounts experienced more pricing pressure. We again recognized reserve redundancy from prior accident years due to continued favorable claims emergence. For the balance of this year, I anticipate we will continue to execute at a high level and deliver superior returns to our shareholders.”
The Company will hold its quarterly conference call to discuss third quarter 2007 results today at 3:00 PM EDT. The call is being webcast and may be accessed at the Company’s web site at www.phly.com. The dial-in phone number for the conference call is (800) 289-0544.

 

 

Press Release
October 25, 2007
Page 3
Forward-Looking Information
This release may contain forward-looking statements that are based on management’s estimates, assumptions and projections. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development, results of the Company’s business, and the other matters referred to above include, but are not limited to: (i) changes in the business environment in which the Company operates, including inflation and interest rates; (ii) changes in taxes, governmental laws, and regulations; (iii) competitive product and pricing activity; (iv) difficulties of managing growth profitably; (v) claims development and the adequacy of the Company’s liability for unpaid loss and loss adjustment expenses; (vi) severity of natural disasters and other catastrophe losses; (vii) adequacy of reinsurance coverage which may be obtained by the Company; (viii) ability and willingness of the Company’s reinsurers to pay; (ix) future terrorist attacks; (x) the outcome of the Securities and Exchange Commission’s industry-wide investigation relating to the use of non-traditional insurance products, including finite risk reinsurance arrangements; and (xi) the outcome of industry-wide investigations being conducted by various insurance departments, attorneys-general and other authorities relating to the use of contingent commission arrangements. The Company does not intend to publicly update any forward looking statement, except as may be required by law.
In operation since 1962, PHLY designs, markets, and underwrites commercial property/casualty, professional liability and personal lines insurance products incorporating value added coverages and services for select industries. The Company, whose commercial and personal lines subsidiaries are rated A+ (Superior), and A- (Excellent), respectively, by A.M. Best Company, is nationally recognized as a member of Ward’s Top 50, Forbes’ Platinum 400 list of America’s Best Big Companies and Forbes’ 100 Best Mid-Cap Stocks in America. The organization has 42 offices strategically located across the United States to provide superior local service.
CONTACT: Investor Relations: Joseph Barnholt, Assistant Vice President, +1-610-617-7626, jbarnholt@phlyins.com.

 

 

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
                 
    As of  
    September 30,     December 31,  
    2007     2006  
    (Unaudited)          
ASSETS
                
INVESTMENTS:
                
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET (AMORTIZED COST $2,503,942 AND $2,136,231)
   $ 2,495,045     $ 2,129,609  
EQUITY SECURITIES AT MARKET (COST $319,000 AND $259,184)
     362,238       304,033  
 
            
TOTAL INVESTMENTS
     2,857,283       2,433,642  
 
                
CASH AND CASH EQUIVALENTS
     122,486       108,671  
ACCRUED INVESTMENT INCOME
     24,303       20,083  
PREMIUMS RECEIVABLE
     406,481       346,836  
PREPAID REINSURANCE PREMIUMS AND REINSURANCE RECEIVABLES
     276,849       272,798  
DEFERRED INCOME TAXES
     47,926       26,657  
DEFERRED ACQUISITION COSTS
     188,144       158,805  
PROPERTY AND EQUIPMENT, NET
     26,813       26,999  
OTHER ASSETS
     47,502       44,046  
 
            
TOTAL ASSETS
   $ 3,997,787     $ 3,438,537  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
POLICY LIABILITIES AND ACCRUALS:
                
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES
   $ 1,394,834     $ 1,283,238  
UNEARNED PREMIUMS
     871,842       759,358  
 
            
TOTAL POLICY LIABILITIES AND ACCRUALS
     2,266,676       2,042,596  
PREMIUMS PAYABLE
     88,082       66,827  
OTHER LIABILITIES
     196,353       161,847  
 
            
TOTAL LIABILITIES
     2,551,111       2,271,270  
 
            
 
                
COMMITMENTS AND CONTINGENCIES
                
 
                
SHAREHOLDERS’ EQUITY:
                
PREFERRED STOCK, $.01 PAR VALUE, 10,000,000 SHARES AUTHORIZED, NONE ISSUED AND OUTSTANDING
     —       —  
COMMON STOCK, NO PAR VALUE, 100,000,000 SHARES AUTHORIZED, 71,511,222 AND 70,848,482 SHARES ISSUED AND OUTSTANDING
     402,010       376,986  
NOTES RECEIVABLE FROM SHAREHOLDERS
     (16,787 )     (17,074 )
ACCUMULATED OTHER COMPREHENSIVE INCOME
     22,321       24,848  
RETAINED EARNINGS
     1,039,132       782,507  
 
            
TOTAL SHAREHOLDERS’ EQUITY
     1,446,676       1,167,267  
 
            
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 3,997,787     $ 3,438,537  
 
            

 

 

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
                                 
    For the Three Months     For the Nine Months  
    Ended September 30,     Ended September 30,  
    2007     2006     2007     2006  
REVENUE:
                                
NET EARNED PREMIUMS
   $ 359,149     $ 296,366     $ 1,015,182     $ 861,706  
NET INVESTMENT INCOME
     30,199       23,833       85,694       65,572  
NET REALIZED INVESTMENT GAIN (LOSS)
     2,817       (6,976 )     32,638       (9,782 )
OTHER INCOME
     980       795       2,660       1,703  
 
                        
TOTAL REVENUE
     393,145       314,018       1,136,174       919,199  
 
                        
 
                                
LOSSES AND EXPENSES:
                                
LOSS AND LOSS ADJUSTMENT EXPENSES
     146,389       95,662       479,142       353,289  
NET REINSURANCE RECOVERIES
     (1,584 )     (10,956 )     (35,243 )     (16,163 )
 
                        
NET LOSS AND LOSS ADJUSTMENT EXPENSES
     144,805       84,706       443,899       337,126  
ACQUISITION COSTS AND OTHER UNDERWRITING EXPENSES
     101,252       89,052       299,902       251,406  
OTHER OPERATING EXPENSES
     2,992       3,364       9,128       8,644  
 
                        
TOTAL LOSSES AND EXPENSES
     249,049       177,122       752,929       597,176  
 
                        
 
                                
INCOME BEFORE INCOME TAXES
     144,096       136,896       383,245       322,023  
 
                        
 
                                
INCOME TAX EXPENSE (BENEFIT):
                                
 
                                
CURRENT
     53,198       49,725       146,528       116,448  
DEFERRED
     (5,346 )     (2,719 )     (19,908 )     (9,493 )
 
                        
 
                                
TOTAL INCOME TAX EXPENSE
     47,852       47,006       126,620       106,955  
 
                        
 
                                
NET INCOME
   $ 96,244     $ 89,890     $ 256,625     $ 215,068  
 
                        
 
                                
PER AVERAGE SHARE DATA:
                                
NET INCOME – BASIC
   $ 1.37     $ 1.28     $ 3.65     $ 3.08  
 
                        
NET INCOME – DILUTED
   $ 1.30     $ 1.22     $ 3.46     $ 2.94  
 
                        
 
                                
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
     70,457,765       69,991,728       70,323,834       69,717,194  
WEIGHTED-AVERAGE SHARE EQUIVALENTS OUTSTANDING
     3,599,654       3,488,999       3,856,902       3,470,645  
 
                        
WEIGHTED-AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING
     74,057,419       73,480,727       74,180,736       73,187,839