<PAGE> 1
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 June 30, 1997
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 August 11, 1997.
Preferred Stock, $.01 par value, no shares outstanding
Common Stock, no par value, 6,105,008 shares outstanding
1
<PAGE> 2
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
INDEX
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
Part I - Financial Information
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations - For the three and six
months ended June 30, 1997 and 1996 4
Consolidated Statements of Changes in Shareholders' Equity - For the
six months ended June 30, 1997 and year ended
December 31, 1996 5
Consolidated Statements of Cash Flows - For the six
months ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Results of Operations and
Financial Condition 8-10
Part II - Other Information 11-12
Signatures 13
Exhibits 14
2
<PAGE> 3
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
As of
--------------------------
June 30, December 31,
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
INVESTMENTS:
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET
(AMORTIZED COST $153,044 AND $137,757) (including $23,662 and
$24,867 in Trust Accounts) ................................. $ 156,131 $ 141,236
EQUITY SECURITIES AT MARKET (COST $23,658 AND $19,648) ...... 36,433 27,342
--------- ---------
TOTAL INVESTMENTS ........................................ 192,564 168,578
CASH AND CASH EQUIVALENTS (including $1,062 and $1,224 in Trust
Accounts) ................................................... 8,525 11,483
ACCRUED INVESTMENT INCOME ...................................... 2,633 2,626
PREMIUMS RECEIVABLE ............................................ 13,046 8,112
PREPAID REINSURANCE PREMIUMS AND
REINSURANCE RECEIVABLES ..................................... 16,873 18,078
DEFERRED ACQUISITION COSTS ..................................... 9,649 9,033
PROPERTY AND EQUIPMENT ......................................... 5,749 5,226
GOODWILL-LESS ACCUMULATED AMORTIZATION OF
$1,347 AND $1,313 ........................................... 737 771
OTHER ASSETS ................................................... 1,979 2,031
--------- ---------
TOTAL ASSETS ............................................. $ 251,755 $ 225,938
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
POLICY LIABILITIES AND ACCRUALS:
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES .................... $ 108,591 $ 96,642
UNEARNED PREMIUMS ........................................... 36,589 33,154
--------- ---------
TOTAL POLICY LIABILITIES AND ACCRUALS ..................... 145,180 129,796
PREMIUMS PAYABLE ............................................... 638 698
OTHER LIABILITIES .............................................. 6,062 7,614
DEFERRED INCOME TAXES .......................................... 2,606 1,240
INCOME TAXES PAYABLE ........................................... 543 948
--------- ---------
TOTAL LIABILITIES ......................................... 155,029 140,296
--------- ---------
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, 6,091,855 AND 6,039,806 SHARES ISSUED
AND OUTSTANDING ............................................ 42,119 41,167
NOTES RECEIVABLE FROM SHAREHOLDERS .......................... (1,342) (924)
UNREALIZED INVESTMENT APPRECIATION (DEPRECIATION),
NET OF DEFERRED INCOME TAXES ............................... 10,310 7,374
RETAINED EARNINGS ........................................... 45,639 38,025
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ................................ 96,726 85,642
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................ $ 251,755 $ 225,938
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
GROSS EARNED PREMIUMS ................. $ 38,066 $ 28,088 $ 70,683 $ 53,526
CEDED EARNED PREMIUMS ................. (12,903) (10,898) (23,132) (20,519)
----------- ----------- ----------- -----------
NET EARNED PREMIUMS ................... 25,163 17,190 47,551 33,007
NET INVESTMENT INCOME ................. 2,404 1,885 4,615 3,731
NET REALIZED INVESTMENT GAIN (LOSS) ... (59) 122 (31) 95
OTHER INCOME .......................... 57 76 114 124
----------- ----------- ----------- -----------
TOTAL REVENUE ...................... 27,565 19,273 52,249 36,957
----------- ----------- ----------- -----------
LOSSES AND EXPENSES:
LOSS AND LOSS ADJUSTMENT EXPENSES ..... 16,018 10,225 29,403 20,204
NET REINSURANCE RECOVERIES ............ (2,186) (1,136) (3,090) (2,441)
----------- ----------- ----------- -----------
NET LOSS AND LOSS ADJUSTMENT EXPENSES . 13,832 9,089 26,313 17,763
ACQUISITION COSTS AND OTHER
UNDERWRITING EXPENSES ................ 7,858 5,836 14,804 10,943
OTHER OPERATING EXPENSES .............. 656 498 1,179 898
----------- ----------- ----------- -----------
TOTAL LOSSES AND EXPENSES .......... 22,346 15,423 42,296 29,604
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES .............. 5,219 3,850 9,953 7,353
----------- ----------- ----------- -----------
INCOME TAX EXPENSE (BENEFIT):
CURRENT ............................... 1,164 880 2,726 1,719
DEFERRED .............................. 63 (87) (387) (138)
----------- ----------- ----------- -----------
TOTAL INCOME TAX EXPENSE ........... 1,227 793 2,339 1,581
----------- ----------- ----------- -----------
NET INCOME ......................... $ 3,992 $ 3,057 $ 7,614 $ 5,772
=========== =========== =========== ===========
PER AVERAGE COMMON SHARE DATA:
NET INCOME ......................... $ .54 $ .43 $ 1.03 $ .82
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES AND SHARE
EQUIVALENTS USED IN COMPUTATION OF NET
INCOME PER COMMON SHARE .............. 7,424,952 7,074,412 7,392,968 7,063,707
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
For the Six Months For the Year Ended
Ended June 30, December 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
COMMON SHARES:
BALANCE AT BEGINNING OF PERIOD ................ 6,039,806 5,813,851
ISSUANCE OF SHARES
PURSUANT TO EMPLOYEE STOCK PURCHASE PLAN .... 27,799 78,455
PURSUANT TO EMPLOYEE STOCK OPTION PLAN ...... 24,250 147,500
----------- -----------
BALANCE AT END OF PERIOD .................. 6,091,855 6,039,806
=========== ===========
COMMON STOCK:
BALANCE AT BEGINNING OF PERIOD ................ $ 41,167 $ 39,057
ISSUANCE OF SHARES
PURSUANT TO EMPLOYEE STOCK PURCHASE PLAN .... 540 1,131
EXERCISE OF EMPLOYEE STOCK OPTIONS, NET OF TAX
BENEFIT ..................................... 412 979
----------- -----------
BALANCE AT END OF PERIOD .................. 42,119 41,167
----------- -----------
NOTES RECEIVABLE FROM SHAREHOLDERS:
BALANCE AT BEGINNING OF PERIOD ................ (924) --
NOTES RECEIVABLE ISSUED
PURSUANT TO EMPLOYEE STOCK PURCHASE PLAN .... (540) (1,131)
COLLECTION OF NOTES RECEIVABLE ................ 122 207
----------- -----------
BALANCE AT END OF PERIOD .................. (1,342) (924)
----------- -----------
UNREALIZED INVESTMENT APPRECIATION (DEPRECIATION),
NET OF DEFERRED INCOME TAXES:
BALANCE AT BEGINNING OF PERIOD .............. 7,374 4,608
CHANGE IN UNREALIZED INVESTMENT APPRECIATION
(DEPRECIATION), NET OF DEFERRED INCOME TAXES 2,936 2,766
----------- -----------
BALANCE AT END OF PERIOD .................. 10,310 7,374
----------- -----------
RETAINED EARNINGS:
BALANCE AT BEGINNING OF PERIOD ................ 38,025 24,651
NET INCOME .................................... 7,614 13,374
----------- -----------
BALANCE AT END OF PERIOD .................. 45,639 38,025
----------- -----------
TOTAL SHAREHOLDERS' EQUITY ................ $ 96,726 $ 85,642
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME ..................................... $ 7,614 $ 5,772
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET REALIZED INVESTMENT (GAIN) LOSS ........ 31 (95)
DEPRECIATION AND AMORTIZATION EXPENSE ...... 612 450
DEFERRED INCOME TAX BENEFIT ................ (387) (138)
CHANGE IN PREMIUMS RECEIVABLE .............. (4,934) (962)
CHANGE IN OTHER RECEIVABLES ................ 1,198 (2,168)
CHANGE IN DEFERRED ACQUISITION COSTS ....... (616) (1,453)
CHANGE IN OTHER ASSETS ..................... 52 (443)
CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT
EXPENSES ................................. 11,949 7,910
CHANGE IN UNEARNED PREMIUMS ................ 3,435 4,316
CHANGE IN PREMIUMS PAYABLE AND OTHER
LIABILITIES .............................. (1,695) (254)
CHANGE IN INCOME TAXES PAYABLE ............. (405) 403
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,854 13,338
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF INVESTMENTS IN FIXED
MATURITY SECURITIES AVAILABLE FOR SALE ..... 1,461 2,594
PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED
MATURITY SECURITIES AVAILABLE FOR SALE ..... 2,220 5,921
PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY
SECURITIES ................................. 2,524 1,352
COST OF FIXED MATURITY SECURITIES AVAILABLE
FOR SALE ACQUIRED .......................... (19,068) (18,129)
COST OF EQUITY SECURITIES ACQUIRED ........... (6,456) (5,908)
PURCHASE OF PROPERTY AND EQUIPMENT ........... (1,027) (1,438)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES .... (20,346) (15,608)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
EXERCISE OF EMPLOYEE STOCK OPTIONS,
NET OF TAX BENEFIT .......................... 412 851
COLLECTION OF NOTES RECEIVABLE ............... 122 129
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 534 980
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ...... (2,958) (1,290)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,483 5,680
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..... $ 8,525 $ 4,390
======== ========
CASH PAID DURING THE PERIOD FOR:
INCOME TAXES .................................. $ 2,992 $ 1,305
NON-CASH TRANSACTIONS:
ISSUANCE OF SHARES PURSUANT TO EMPLOYEE
STOCK PURCHASE PLAN ......................... $ 540 $ 1,163
NOTES RECEIVABLE ISSUED PURSUANT TO
EMPLOYEE STOCK PURCHASE PLAN ................ $ (540) $ (1,163)
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
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 six months
ended June 30, 1997 and 1996 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 normal recurring accruals, necessary for a fair
presentation of the information set forth therein. The results of
operations for the six months ended June 30, 1997 are not necessarily
indicative of the operating results to be expected for the full year or
any other period.
These financial statements should be read in conjunction with the
financial statements and notes as of and for the year ended December
31, 1996 included in the Company's Annual Report on Form 10-K.
2. 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.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
per Share", specifying the computation, presentation, and disclosure
requirements for earnings per share for entities with publicly held
common stock. Under SFAS No. 128, entities shall present basic and
diluted per-share amounts for income from continuing operations and for
net income on the face of the income statement. The objective of basic
earnings per share is to measure the performance of an entity over the
reporting period and the objective of diluted earnings per share should
be consistent with the basic earnings per share objective while giving
effect to all dilutive potential common shares that were outstanding
during the period. The provisions of this statement are effective for
financial statements for interim and annual periods ending after
December 15, 1997. The company plans to adopt the provisions of SFAS
No. 128 as of December 31, 1997 and restate all prior period earnings
per share data to conform with the provisions of this Statement. The
calculated amount of basic and diluted earnings per share for the three
and six months ended June 30, 1997 was $0.66 and $0.54, and $1.25 and
$1.03, respectively.
3. Income Taxes
The effective tax rate differs from the 34% 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.
7
<PAGE> 8
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
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
commercial property and casualty insurance industry has tended to
fluctuate in cyclical patterns of soft markets followed by hard
markets. In the current environment, insurance industry pricing in
general continues to be soft; however, 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 commercial 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 - Commercial 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.
RESULTS OF OPERATIONS (SIX MONTHS ENDED JUNE 30, 1997 VS JUNE 30, 1996)
Premiums: Gross written premiums grew $16.3 million (28.2%) to $74.1
million for the six months ended June 30, 1997 from $57.8 million for the same
period of 1996; gross earned premiums grew $17.2 million (32.1%) to $70.7
million for the six months ended June 30, 1997 from $53.5 million for the same
period of 1996; net written premiums increased $16.9 million (46.0%) to $53.6
million for the six months ended June 30, 1997 from $36.7 million for the same
period of 1996; and net earned premiums grew $14.6 million (44.2%) to $47.6
million in 1997 from $33.0 million in 1996. The overall growth in premiums and
the varying growth rates for gross written premiums, gross earned premiums, net
written premiums, and net earned premiums are attributable to a number of
factors:
- - Overall premium growth is primarily attributable to: continued
marketing efforts of commercial auto, commercial package, and specialty
lines products along with the continued development of the Company's
Preferred Agent Plan, wherein business relationships are formed with
brokers specializing in certain of the Company's business niches
thereby increasing the distribution of the Company's niche products.
- - Net written and net earned premiums grew at higher rates than gross
written and gross earned premiums primarily due to the renegotiation of
the Company's reinsurance program effective January 1, 1997 whereby
more favorable reinsurance rates were realized while substantially the
same retentions and coverages were maintained.
Net Investment Income: Net investment income approximated $4.6 million
for the six months ended June 30, 1997 and $3.7 million for the same period of
1996. Total investments grew to $192.6 million at June 30, 1997 from $146.2
million at June 30, 1996, primarily due to the investment of cash flows provided
from operating activities.
Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $8.5 million (47.8%) to $26.3 million for the six months
ended June 30, 1997 from $17.8 million for the same period of 1996. The increase
in net loss and loss adjustment expenses was due primarily to the 44.2% growth
in net earned premiums. The loss ratio increased to 55.3% in 1997 from 53.8%
in 1996.
8
<PAGE> 9
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
(continued)
Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $3.9 million (35.8%) to $14.8 million
for the six months ended June 30, 1997 from $10.9 million for the same period of
1996. This increase was due primarily to the 44.2% growth in net earned premiums
offset in part by changes in product and distribution mix.
Income Tax Expense: The Company's effective tax rate for the six months
ended June 30, 1997 and 1996 was 23.5% and 21.5%, respectively. The effective
rates differed from the 34% statutory rate principally due to investments in
tax-exempt securities and the dividend received deduction.
RESULTS OF OPERATIONS (THREE MONTHS ENDED JUNE 30, 1997 VS JUNE 30, 1996)
Premiums: Gross written premiums grew $9.1 million (29.9%) to $39.5
million for the three months ended June 30, 1997 from $30.4 million for the same
period of 1996; gross earned premiums grew $10.0 million (35.6%) to $38.1
million for the three months ended June 30, 1997 from $28.1 million for the same
period of 1996; net written premiums increased $7.2 million (37.5%) to $26.4
million for the three months ended June 30, 1997 from $19.2 million for the same
period of 1996; and net earned premiums grew $8.0 million (46.5%) to $25.2
million in 1997 from $17.2 million in 1996. The overall growth in premiums and
the varying growth rates for gross written premiums, gross earned premiums, net
written premiums, and net earned premiums are attributable to a number of
factors:
- - Overall premium growth is primarily attributable to: continued
marketing efforts of commercial auto, commercial package, and specialty
lines products along with the continued development of the Company's
Preferred Agent Plan, wherein business relationships are formed with
brokers specializing in certain of the Company's business niches
thereby increasing the distribution of the Company's niche products.
- - Net written and net earned premiums grew at higher rates than gross
written and gross earned premiums primarily due to the renegotiation of
the Company's reinsurance program effective January 1, 1997 whereby
more favorable reinsurance rates were realized while substantially the
same retentions and coverages were maintained.
Net Investment Income: Net investment income approximated $2.4 million
for the three months ended June 30, 1997 and $1.9 million for the same period of
1996. Total investments grew to $192.6 million at June 30, 1997 from $146.2
million at June 30, 1996, primarily due to the investment of cash flows provided
from operating activities.
Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $4.7 million (51.6%) to $13.8 million in the second quarter
of 1997 from $9.1 million in the second quarter of 1996. The increase in net
loss and loss adjustment expenses was due primarily to the 46.5% growth in net
earned premiums. The loss ratio increased to 55.0% in 1997 from 52.9% in 1996.
Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $2.1 million (36.2%) to $7.9 million
for the three months ended June 30, 1997 from $5.8 million for the same period
of 1996. This increase was due primarily to the 46.5% growth in net earned
premiums offset in part by changes in product and distribution mix.
Income Tax Expense: The Company's effective tax rate for the three
months ended June 30, 1997 and 1996 was 23.5% and 20.6%, respectively. The
effective rates differed from the 34% statutory rate principally due to
investments in tax-exempt securities and the dividend received deduction.
9
<PAGE> 10
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
(continued)
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1997, the Company's investments
experienced unrealized investment appreciation of $2.9 million, net of the
related deferred tax expense of $1.6 million. The change in unrealized
appreciation (depreciation), is primarily due to changes in market interest
rates and conditions during the period. At June 30, 1997, 100% of the Company's
fixed maturity securities consisted of U.S. Government securities or securities
rated "1" or "2" by the NAIC, 95.7% were rated "A-" or better (with no security
rated lower than "BBB-") by Standard & Poor's Corporation.
The Company produced net cash from operations of $16.9 million and $13.3
million, respectively, for the six months ended June 30, 1997 and 1996.
Management believes that the Company has adequate ability to pay all claims and
meet all other cash needs.
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 in excess of the
prescribed risk-based capital requirements.
10
<PAGE> 11
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's annual meeting of shareholders held on May 8, 1997,
the following members were elected to the Board of Directors:
William J. Henrich, Jr.
Paul J. Hertel, Jr.
Roger L. Larson
James J. Maguire
Thomas J. McHugh
Michael J. Morris
Sean S. Sweeney
J. Eustace Wolfington
4,556,099 affirmative votes were received for the election of
Directors.
The following other matters were approved at the Annual Meeting:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
--------- ------------- -----------
<S> <C> <C> <C>
Approval of the Appointment of Coopers & Lybrand L.L.P
as independent auditors for the year 1997 4,681,999 100 0
Approval of the Amended and Restated Employee's
Stock Option Plan 3,731,513 944,686 5,900
Approval of the Directors Stock Purchase Plan 4,393,549 281,050 7,500
</TABLE>
Item 5. Other information.
None
11
<PAGE> 12
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit No. Page No. Description
----------- -------- -----------
10.1.1 Amended and Restated Employee's
Stock Option Plan.
10.36 Directors Stock Purchase Plan
11.00 Computation of Earnings Per Share.
b. The Company has not filed any reports on Form 8-K during the
quarter for which this report is filed.
12
<PAGE> 13
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 August 11, 1997 /s/ James J. Maguire
--------------- ------------------------
James J. Maguire
Chairman of the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
Date August 11, 1997 /s/ Craig P. Keller
---------------- -----------------------
Craig P. Keller
Vice President, Secretary and
Chief Financial Officer (Principal Financial
and Accounting Officer)
13
<PAGE> 1
EXHIBIT 10.1.1
PHILADELPHIA CONSOLIDATED HOLDING CORP.
EMPLOYEE'S STOCK OPTION PLAN
(Amended and Restated)
Philadelphia Consolidated Holding Corp., a Pennsylvania corporation
(referred to herein, along with its subsidiaries, as appropriate, as the
"Company"), hereby amends and restates its Employees' Stock Option Plan
(formerly, the Philadelphia Consolidated Holding Corp. Key Employee's Stock
Option Plan, referred to herein as the "Plan") to read in its entirety as
follows:
1. Purpose. The purpose of the Plan is to secure for the Company the
benefits of the additional incentive inherent in the ownership of its Common
Stock by selected employees of the Company and its subsidiaries, and to help the
Company and its subsidiaries secure and retain the services of such employees.
2. Stock Option Committee. The Plan shall be administered by the
Company's Compensation Committee, and/or by another committee or committees as
may be designated by the Company's Board of Directors, or by the Company's Board
of Directors itself (any such committee or committees and the Board of Directors
in its capacity as administrative committee for the Plan are referred to herein
as the "Committee"). The Committee shall, to the extent possible and to the
extent the Board of Directors determines it to be appropriate, consist of two or
more members of the Board of Directors who qualify as "Non-employee Directors."
For these purposes, the term "Non-employee Director" means a member of the
Company's Board of Directors who qualifies both as a "non-employee" director as
that term is defined in paragraph (b)(3) of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, and as an "outside" director as that term is
defined in Treasury Regulation Section 1.162-27.
3. Employee Options. The Committee shall have the authority and
responsibility, within the limitations of the Plan, to determine the employees
to whom stock options ("Employee Options") are to be granted pursuant to this
paragraph 3, the number of shares that may be purchased under each Employee
Option, and the exercise price of the Option (the "Option Price").
Notwithstanding anything contained herein to the contrary, no employee shall be
granted Employee Options to acquire more than one hundred thousand (100,000)
shares of Company Common Stock during any calendar year.
In determining the employees to whom Options shall be granted and
number of shares to be covered by each such Employee Option, the Committee shall
take into consideration the employee's present and potential contribution to the
success of the Company and its subsidiaries and such other factors as the
Committee may deem proper and relevant. Employees who are also officers or
directors of the Company or its subsidiaries shall not by reason of such offices
be ineligible to receive Employee Options under the Plan; members of the
Committee shall, however, be ineligible to receive Employee Options under this
Plan.
<PAGE> 2
An employee receiving any Employee Option is hereafter referred to as
an "Employee Optionee". Any reference herein to the employment of an Employee
Optionee with the Company shall include his employment with the Company or any
of its subsidiaries.
4. Stock Subject to Options. Subject to adjustment in accordance with
paragraph 12, options to purchase a total of 1,237,500 shares of Common Stock
(taking into account options previously granted under this Plan prior to this
amendment and restatement) are authorized for issuance under this Plan. If, and
to the extent that, stock options granted under this Plan ("Options") terminate
or expire without the Options being exercised, new options may be granted with
respect to the shares covered by such terminated or expired Options provided
that the granting and terms of such new Options shall in all respects comply
with the provision of this Plan.
Shares distributed under this Plan may be shares of Common Stock
purchased by the Company for use with respect to the Plan or otherwise, shares
of the Company's authorized and unissued Common Stock, shares of the Company's
issued Common Stock held in the Company's treasury, or any combination of such
shares.
There shall be reserved at all times for issuance under this Plan a
number of shares of Common Stock (either authorized and unissued shares or
shares held in the Company's treasury, or both) equal to the maximum number of
shares which may be distributed under this Plan.
5. Option Price of Each Employee Option. The Option Price of each
Option shall be the fair market value of a share of the Company's Common Stock
at the time the Option is granted, as determined by the Committee. For these
purposes, the fair market value of the Common Stock shall be equal to the
closing price of the Common Stock on the day of grant as reported on the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System, or as reported on such other stock exchange,
wherever the Common Stock may be listed, on such date as reported in the Wall
Street Journal, or if there is no closing price reported, then fair market value
of the Common Stock shall mean the average between the closing bid and asked
prices for the Common Stock on such date as reported. If there are no sales
reports or bid or asked quotations, as the case may be, for a given date, the
closest preceding date on which there were sales reports or bid or asked
quotations shall be used, as applicable and as the Committee may determine.
6. Expiration and Termination of the Plan. Options may be granted under
this Plan at any time and from time to time, and such Options shall remain in
effect until they have been exercised or have terminated pursuant to paragraph 8
below. This Plan may be terminated or modified at any time by the Company's
Board of Directors except with respect to any Options then outstanding under the
Plan; provided that the approval of the Company's shareholders shall be required
for each amendment that would materially increase the benefits accruing to
participants under this plan, increase the number of shares which may be issued
2
<PAGE> 3
under this Plan, or materially modify the requirements as to eligibility for
participation in this Plan.
No modification, extension, renewal or other change in any Option
granted under this Plan shall be made after the grant of such Option, unless the
same is consistent with the provisions of this Plan.
7. Exercisability and Duration of Options.
(a) An Employee Option granted under this Plan shall become exercisable
in accordance with such schedule or terms as may be determined at
the discretion of the Committee and as set forth in the
documentation provided to the Employee at the time an Employee
Option is granted.
(b) The unexercised portion of any Employee Option granted under this
Plan shall automatically and without notice terminate and become
null and void at the time of the earliest to occur of the
following:
(1) the expiration of ten years from the date on which such option
was granted;
(2) the expiration of 30 days from the date of not-for-cause
termination of the Optionee's employment with the Company;
provided that if the Optionee shall die during such 30 day
period the provisions of sub-paragraph (3) below shall apply;
(3) the expiration of six months following the issuance of letters
testamentary or letters of administration to the executor or
administrator of a deceased Optionee, if the Optionee's death
occurs either during his employment with the Company or during
the 30 day period following the date of a not-for-cause
termination of such employment, but not later than one year
after the Optionee's death;
(4) the termination of the Optionee's employment with the Company
for cause, including breach by the Optionee of an employment
agreement with the Company or any of its subsidiaries or the
Optionee's commission of a felony or misdemeanor (whether or
not prosecuted) against the Company or any of its subsidiaries;
(5) the expiration of such period of time or the occurrence of such
event as the Committee in its discretion may provide upon the
granting thereof.
3
<PAGE> 4
(c) Notwithstanding any other provision of this Plan to the contrary,
Employee Options, whenever granted, that became immediately
exercisable upon the Company's consummation of its initial public
offering shall not by reason thereof be deemed to conflict with the
provisions of this Plan; and Employee Options granted prior to the
effective date of the registration statement under the Securities
Exchange Act of 1934 with respect to the Company's Common Stock
pursuant to a delegation of authority from the Committee shall not
be deemed to conflict with the provisions of this Plan by reason of
such delegation.
8. Exercise of Options. Options granted under this Plan shall be
exercised by the Optionee (or by his executors and administrators, as provided
in paragraph 9) as to all or part of the shares covered thereby, by the giving
of written notice of the exercise thereof to the Company at its principal
business office, specifying the number of shares to be purchased and specifying
a business day not more than 15 days from the date such notice is given, for the
payment of the purchase price, by certified or cashier's check or wire transfer,
against delivery of the shares being purchased. At the discretion of the
Committee, an Optionee can be required to provide up to five business days
notice of his or her intention to exercise an Option; provided, however, that if
notice is given prior to the termination date of an Option, the Option shall not
terminate merely by reason of the subsequent occurrence of the termination date
during the five day notice period. The giving of such written notice to the
Company shall constitute an irrevocable election to purchase the number of
shares specified in the notice, which may be specifically enforced by the
Company.
The Company shall cause certificates for the shares so purchased to be
delivered to the Optionee or his executors or administrators at its principal
business office, against payment of the purchase price, on the date specified in
the notice of exercise, subject to an amount equal to the income taxes required
to be withheld by the Company from the Optionee with respect to such purchase
being paid to the Company on such date.
Notwithstanding anything contained herein to the contrary, the
Committee may provide in the option documents provided with respect to any
Option granted under the Plan for alternative means whereby the Option may be
exercised, including, but not limited to withholding a number of shares
otherwise transferable to the Optionee for the purpose of satisfying any
applicable withholding obligations or for payment of the Option Price and
permitting any other method of "cashless" exercise, such provisions to be
included and/or limited at the sole discretion of the Committee.
9. Nontransferability of Option. No Option granted under this Plan
shall be transferable by the Optionee other than to the Optionee's executors or
administrators by will or the laws of descent and distribution. Notwithstanding
the foregoing, any Option may be transferred (i) pursuant to the terms of a
"qualified domestic relations order," within the meaning of Sections 401(a)(13)
and 414(p) of the Code or within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, as amended, or (ii), to the extent
provided for in the
4
<PAGE> 5
option documents provided with respect to any Option granted under the Plan, at
the discretion of the Committee, by the Optionee to his or her children,
grandchildren or spouse or to one or more trusts for the benefit of such family
members or to partnerships in which such family members are the only partners,
provided that the Optionee receives no consideration for a Family Transfer and
provided further that any Options so transferred continue to be subject to the
same terms and conditions that were applicable to such Options immediately prior
to the transfer.
In the event of the Optionee's death during his employment with the
Company, his Option shall, unless previously tranferred as specifically
permitted under this Paragraph 9, be exercisable thereafter in accordance with
the terms and conditions of the Option only by his or her executors or
administrators.
10. Rights of Optionee. Neither the Optionee nor his executors or
administrators shall have any of the rights of a stockholder of the Company with
respect to the shares subject to any Option until certificates for such shares
shall have been issued and distributed.
11. Right to Terminate. Nothing in this Plan shall confer upon any
Optionee the right to continue as an employee or director of the Company or
affect the right of the Company or any of its subsidiaries to terminate the
Optionee's employment or directorship at any time, subject, however, to
applicable law and the provisions of any agreement of employment between the
Company or any of its subsidiaries and the Optionee.
12. Adjustment Upon Changes in Capitalization, etc.. In the event of
any stock split, stock dividend, reclassification or recapitalization which
changes the character or amount of the Company's outstanding Common Stock while
any portion of any Option theretofore granted under this Plan is outstanding but
unexercised, the Committee shall make such adjustments in the character and
number of shares subject to the Option and in the Option Price as shall be
equitable and appropriate in order to make the Option as nearly as may be
practicable equivalent to such Option immediately prior to such change; provided
that no such adjustment shall give the Optionee any additional benefits under
his Option.
If the Company participates in any transaction resulting in a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board of Directors of the Company or any
surviving or acquiring corporation shall take such action as is equitable and
appropriate to substitute a new stock option for the old one, or to assume the
old option, in order to make the new option, as nearly as may be practicable,
equivalent to the old option.
If any such change or transaction shall occur, the number and kind of
shares for which stock options may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
5
<PAGE> 6
13. Form of Agreements with Optionee. Each Option granted under this
Plan shall be substantially in a form to be drafted by the Committee consistent
with the provisions of this Plan.
14. Purchase for Investment and Legality. The Optionee, by his
acceptance of an Option granted under this Plan, shall represent and warrant to
the Company that his purchase and receipt of shares of Common Stock thereunder
shall be for investment and not with a view to distribution, provided that such
representation and warranty shall be inoperative if, in the opinion of counsel
to the Company, a proposed sale or distribution of such shares is pursuant to an
applicable effective registration statement under the Securities Act of 1933 or
is exempt from registration under such Act.
The obligation of the Company to issue shares upon the exercise of an
Option shall also be subject as conditions precedent to compliance with
applicable provisions of the Securities Act of 1933, the Securities Exchange Act
of 1934, state securities laws, rules and regulations under any of the foregoing
and applicable requirements of any securities exchange or market upon which the
Company's securities shall be listed.
The Company may endorse an appropriate legend referring to the
foregoing restrictions upon the certificate or certificates representing any
shares issued or transferred to the Optionee upon the exercise of any Option
granted under this Plan.
15. Withholding. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes or payment of any taxes which it
determines it may be required to withhold or pay in connection with any Shares.
The obligation of the Company to deliver certificates under this Plan is
conditioned upon the satisfaction of the provisions set forth in the preceding
sentence.
16. Effective Date of Plan. This amended and restated Plan shall become
effective upon its adoption by the Board of Directors of the Company, subject
however to its approval by the Company's stockholders after the date of such
adoption.
6
<PAGE> 1
EXHIBIT 10.36
PHILADELPHIA INSURANCE COMPANIES
DIRECTORS STOCK PURCHASE PLAN
1. Purpose and Date of Adoption.
(a) The purpose of the Philadelphia Insurance Companies Directors
Stock Purchase Plan (the "Plan") is to assist the Philadelphia Consolidated
Holding Corp., a Pennsylvania corporation (the "Company") in retaining and/or
recruiting new non-employee members of the Board (as hereinafter defined) by
offering them a greater stake in the Company's success and a closer identity
with it. This is to be accomplished by providing the non-employee members of the
Company's Board of Directors a continuing opportunity to purchase Shares (as
hereinafter defined) from the Company through monthly offerings.
(b) The Plan is adopted by the Company effective May 8, 1997,
subject to the approval of the Plan by the Company's shareholders.
2. Definitions. For purposes of the Plan:
"Agent" means a person appointed by the Committee to perform such
duties as are entrusted to such Agent under the authority of Section 3(d) of the
Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee described in Section 3.
"Company" means Philadelphia Consolidated Holding Corp., a
Pennsylvania corporation.
"Fair Market Value" on any date means the closing price for Shares
as reported on the NASDAQ National Market, or as reported on such other stock
exchange, wherever the Shares may be listed, on such date as reported in the
Wall Street Journal, or if there is no closing price reported, then Fair Market
Value of a Share shall mean the average between the closing bid and asked prices
for Shares on such date as reported. If there are no sales reports or bid or
asked quotations, as the case may be, for a given date, the closest preceding
date on which there were sales reports or bid or asked quotations shall be used.
If the Committee determines, in its discretion, that such valuation does not
accurately reflect the value of the Shares or if Shares are not publicly traded,
the Fair Market Value of a Share shall be determined by the Committee.
"NASDAQ" means the National Association of Security Dealers, Inc.
Automated Quotations System.
<PAGE> 2
"Offering Period" means each calendar month commencing with the
first Offering Period and terminating with the last full month prior to the
termination of the Plan. The first Offering Period shall commence on June 1,
1997.
"Participant" means any non-employee member of the Board who makes
an election to participate in the Plan in accordance with Section 5.
"Plan" means the Philadelphia Insurance Companies Directors Stock
Purchase Plan as set forth in this document, and as may be amended from time to
time.
"Plan Year" means the calendar year, except that the first Plan Year
shall be the short period commencing on June 1, 1997 and ending December 31,
1997.
"Purchase Date" means the last business day of each Offering Period.
"Purchase Price" means the lesser of 85% of the Fair Market Value of
a Share on (i) the first business day of the Offering Period or (ii) the
Purchase Date.
"Share" or "Shares" means a share or shares of Common Stock, no par
value, of the Company.
"Subscription Agreement" means the agreement, in a form established
by the Committee, between the Participant and the Company pursuant to which the
Participant agrees to purchase Shares pursuant to the Plan.
3. Administration of the Plan. The Plan shall be administered by the
Company's compensation committee, or by such other committee as may be
designated by the Board, or by the Board itself, as determined from time to time
at the discretion of the Board. The compensation committee of the Company or any
other committee designated to administer the Plan by the Board, or the Board in
its capacity as administrator of the Plan are all referred to herein as the
"Committee." Subject to the express provisions of the Plan, the Committee shall
have full discretionary authority to interpret the Plan, to issue rules for
administering the Plan, to change, alter, amend or rescind such rules, and to
make all other determinations necessary or appropriate for the administration of
the Plan. All determinations, interpretations and constructions made by the
Committee with respect to the Plan shall be final and conclusive.
(a) Meetings. The Committee shall hold meetings at such times and
places as it may determine, shall keep minutes of its meetings, and shall adopt,
amend and revoke such rules or procedures as it may deem proper; provided,
however, that it may take action only upon the agreement of a majority of the
whole Committee. Any action which the Committee shall take through a written
instrument signed by a majority of its members shall be as effective as though
it had been taken at a meeting duly called and held. The Committee shall report
all actions taken by it to the Board.
2
<PAGE> 3
(b) Exculpation. No member of the Committee shall be personally
liable for monetary damages as such for any action taken or any failure to take
any action in connection with the administration of the Plan unless (i) the
member of the Committee has breached or failed to perform the duties of his
office under Subchapter B of Chapter 17 of the Pennsylvania Business Corporation
Law of 1988, as amended, and (ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness; provided, however, that the
provisions of this Section 3(b) shall not apply to the responsibility or
liability of a member of the Committee pursuant to any criminal statute or to
the liability of a member of the Committee for the payment of taxes pursuant to
local, state or federal law.
(c) Indemnification. Service on the Committee shall constitute, for
purposes of rights to indemnification from the Company, service as a member of
the Board. Each member of the Committee shall be entitled, without further act
on his part, to indemnity from the Company and limitation of liability to the
fullest extent provided by applicable law and by the Company's Articles of
Incorporation and/or bylaws in connection with or arising out of any action,
suit or proceeding with respect to the administration of the Plan in which he or
she may be involved by reason of his or her being or having been a member of the
Committee, whether or not he or she continues to be such member of the Committee
at the time of the action, suit or proceeding.
(d) Agent. The Committee may engage an Agent to purchase Shares on
each Purchase Date and to perform custodial and recordkeeping functions for the
Plan, such as holding record title to the Participants' Share certificates and
providing periodic status reports to such Participants.
(e) Delegation. The Committee shall have full discretionary
authority to delegate ministerial functions to management of the Company.
4. Eligibility. Each non-employee member of the Board shall be eligible
to participate in the Plan as of the first day of any Offering Period by filing
a Subscription Agreement in accordance with the provisions of the Plan.
5. Election to Participate.
(a) Initial Subscription Agreements. Each non-employee member of the
Board desiring to become a Participant must file with the Committee a
Subscription Agreement specifying the portion of his fees to be used for the
purchase of Shares during each Offering Period commencing with the first
Offering Period commencing after the receipt by the Committee of the
Participant's Subscription Agreement.
(b) Subsequent Subscription Agreements. A Participant shall continue
to participate in the Plan for each subsequent Offering Period following the
first Offering Period after receipt of a Subscription Agreement for such
Participant, unless the Participant files a written notice with the Committee of
his or her intent to terminate his or her participation in the
3
<PAGE> 4
Plan. A Participant may change the terms of his or her participation in the Plan
by filing with the Committee a new Subscription Agreement specifying the terms
of his or her participation for subsequent Offering Periods.
6. Conditions and Terms of Purchases of Shares.
(a) Each non-employee member of the Board shall be eligible to elect
to participate in the Plan by filing a Subscription Agreement with the Committee
and shall commence his or her participation in the Plan as of the first day of
the next Offering Period. The Participant shall indicate the portion (which can
be specified as a dollar amount or a percentage, which can be up to 100%) of his
or her fees otherwise payable in cash to him or her in his capacity as a member
of the Board during the Offering Period that is to be used to acquire Shares
under the terms of the Plan.
(b) Each Participant shall be granted on the Purchase Date that
number of Shares which could be purchased at the applicable Purchase Price as
determined on the Purchase Date with the fees that the Participant has elected
to be used to acquire such Shares for the Offering Period; provided, however,
that no fractional shares shall be granted and the portion of the fees which
would have purchased a fractional share shall be paid in cash to the Participant
as soon as practicable following the Purchase Date.
(c) The Subscription Agreement filed by a Participant shall remain
in effect for each subsequent Offering Period, unless such Subscription
Agreement is either amended by means of filing a new Subscription Agreement or
revoked in writing by the Participant. Any amendment to or revocation of a
Subscription Agreement must be filed with the Committee prior to the first day
of the Offering Period for which such amendment or revocation is to be
effective.
(d) The Shares granted to a Participant shall be, for all purposes,
treated as Shares owned by the Participant as of the relevant Purchase Date
(notwithstanding any delay in the issuance of a certificate for such Shares
until the end of the calendar year) and such Participant shall have all rights
to vote such Shares and to receive any dividends paid with respect to such
Shares. In the event of any non-cash dividend (such as a share dividend, or the
like) any such non-cash dividends shall be distributed to the Participant at the
same time as the certificate for the Shares is distributed.
7. Adjustment of Shares on Application of Aggregate Limits. If the
total number of Shares that would be purchased pursuant to properly filed
Subscription Agreements for a particular Offering Period exceeds the number of
Shares then available for purchase under the Plan, then the number of available
Shares shall be allocated among the Participants filing Subscription Agreements
for such Offering Period pro-rata on the basis of the amount of fees each
Participant has specified for the acquisition of Shares under the Plan in each
such Subscription Agreement. To the extent that the full amount of the fees
which have been elected to be used for the acquisition of Shares under the Plan
for a particular Offering Period cannot be
4
<PAGE> 5
so used by virtue of the number of Shares then available for purchase under the
Plan, such fees shall be paid in cash to each Participant as soon as practicable
after the Purchase Date.
8. Shares Subject to Plan. The aggregate maximum number of Shares that
may be issued pursuant to the Plan is twenty-five thousand (25,000), subject to
adjustment as provided in Section 16 of the Plan. The Shares delivered pursuant
to the Plan may, at the option of the Company, be Shares purchased specifically
for purposes of the Plan, shares otherwise held in treasury or Shares originally
issued by the Company for such purpose.
9. Distribution of Certificates. Each Participant shall receive a
certificate or certificates for those Shares acquired pursuant to the Plan as
soon as practicable after the end of each calendar year; provided, however, that
a certificate for any Shares held for any Participant whose service as a member
of the Board terminates for any reason shall be distributed to such Participant
as soon as practicable following his or her termination of service.
10. Registration of Certificates. Each certificate distributed to a
Participant may be registered only in the name of the Participant, or, if the
Participant so indicated on the Participant's Subscription Agreement, in the
Participant's name jointly with a member of the Participant's family, with right
of survivorship. A Participant who is a resident of a jurisdiction which does
not recognize such a joint tenancy may have certificates registered in the
Participant's name as tenant in common or as community property with a member of
the Participant's family without right of survivorship.
11. Voting. The Agent shall vote all Shares held for the benefit of a
Participant in accordance with the Participant's instructions.
12. Termination of Service as a member of the Board. In the event of a
Participant ceases to serve as a member of the Board during an Offering Period,
such Participant's Subscription Agreement for such Offering Period shall be
deemed to have been revoked as of the beginning of such Offering Period and such
Participant's fees, if any, payable with respect to his or her service during
such Offering Period shall be paid in cash to the Participant or to such
Participant's estate if his or her termination of Service occurred on account of
his or her death.
13. Rights Not Transferable. Rights under the Plan are not transferable
by a Participant and are exercisable during the Participant's lifetime only by
the Participant.
14. No Right to Continued Service. Neither the Plan nor any right
granted under the Plan shall confer upon any Participant any right to
continuance of service as a member of the Board of Directors of the Company, or
interfere in any way with the right of the Company to terminate the employment
of such Participant.
15. Application of Funds. All funds received or held by the Company
under this Plan may be used for any corporate purpose.
5
<PAGE> 6
16. Adjustments in Case of Changes Affecting Shares. In the event of a
subdivision or split of outstanding Shares, or the payment of a stock dividend,
the Share limit set forth in Section 9 shall be adjusted proportionately, and
such other adjustments shall be made as may be deemed equitable by the
Committee.
17. Amendment of the Plan. The Board may at any time, or from time to
time, amend the Plan in such manner as it may deem advisable. Nevertheless, the
Board may not (i) increase the maximum number of shares that may be issued
pursuant to the Plan (ii) materially increase the benefits accruing to
Participants under the Plan, or (iii) modify the requirements as to eligibility
for participation in the Plan without obtaining approval, within twelve months
before or after such action, of the shareholders if any applicable provisions of
the corporate charter, bylaws, applicable State or other law or any applicable
rules of any security exchange on which the Company's shares are then listed
require such shareholder approval for such amendment, in which case such
approval shall be in accordance with the method and degree of shareholder
approval required under such corporate charter, bylaws, applicable State or
other law or applicable rules of any security exchange on which the Company's
shares are then listed.
18. Termination of the Plan. The Plan and all rights of Participants
under any offering hereunder shall terminate at such time as the Board, at its
discretion, determines to terminate the Plan. Upon termination of this Plan, any
Shares held for Participants shall continue to be held for the Participant's
benefit in connection with a successor plan, if any, or, if there is no
successor plan, certificates for such Shares shall be forwarded to the
Participant as soon as practicable.
19. Governmental Regulations.
(a) Anything contained in this Plan to the contrary
notwithstanding, the Company shall not be obligated to sell or deliver any
Shares or certificates for Shares under this Plan unless and until the Company
is satisfied that such sale or delivery complies with (i) all applicable
requirements of the governing body of the principal market in which such Shares
are traded, (ii) all applicable provisions of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations thereunder and (iii) all
other laws or regulations by which the Company is bound or to which the Company
is subject. If required as a condition to the sale and/or delivery of Shares or
certificates for Shares under the Plan, a Participant shall represent and
warrant to the Company that his purchase and receipt of such Shares or
certificates for Shares shall be for investment and not with a view to
distribution, provided that such representation and warranty shall be
inoperative if, in the opinion of counsel to the Company, such sale of Shares or
certificates for Shares constitutes a sale or distribution pursuant to an
applicable effective registration statement under the Securities Act of 1933 or
is exempt from registration under such Act.
6
<PAGE> 7
(b) The Company may make such provisions as it may deem appropriate
for the withholding of any taxes or payment of any taxes which it determines it
may be required to withhold or pay in connection with any Shares. The obligation
of the Company to deliver certificates under this Plan is conditioned upon the
satisfaction of the provisions set forth in the preceding sentence.
20. Section 16 Restrictions. Notwithstanding any other provision of the
Plan, each Participant and each grant under the Plan shall be subject to such
restrictions as are required so that transactions under the Plan by such
Participant shall be exempt from Section 16(b) of the Exchange Act.
21. Repurchase of Shares. The Company shall not be required to
repurchase from any Participant any Shares which such Participant acquires under
the Plan.
7
<PAGE> 1
EXHIBIT
11.0
<PAGE> 2
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Dollars and Share Data in Thousands, except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
As of and for the As of and for the
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding 6,088 5,877 6,077 5,846
Weighted Average Stock Options Outstanding 1,758 1,818 1,769 1,849
Assumed Shares Repurchased (421) (621) (453) (631)
------- ------- ------- -------
Weighted Average Shares and Share
Equivalents Outstanding 7,425 7,074 7,393 7,064
======= ======= ======= =======
Net Income $ 3,992 $ 3,057 $ 7,614 $ 5,772
======= ======= ======= =======
Net Income per Share $ 0.54 $ 0.43 $ 1.03 $ 0.82
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 156,131
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 36,433
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 192,564
<CASH> 8,525
<RECOVER-REINSURE> 1,115
<DEFERRED-ACQUISITION> 9,649
<TOTAL-ASSETS> 251,755
<POLICY-LOSSES> 108,591
<UNEARNED-PREMIUMS> 36,589
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 42,119
<OTHER-SE> 54,607
<TOTAL-LIABILITY-AND-EQUITY> 251,755
47,551
<INVESTMENT-INCOME> 4,615
<INVESTMENT-GAINS> (31)
<OTHER-INCOME> 114
<BENEFITS> 26,313
<UNDERWRITING-AMORTIZATION> 14,804
<UNDERWRITING-OTHER> 1,179
<INCOME-PRETAX> 9,953
<INCOME-TAX> 2,339
<INCOME-CONTINUING> 7,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,614
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.02
<RESERVE-OPEN> 85,723<F1>
<PROVISION-CURRENT> 26,313
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 3,710
<PAYMENTS-PRIOR> 12,378
<RESERVE-CLOSE> 95,948<F1>
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES DIFFER FROM THE AMOUNTS REPORTED IN
THE CONSOLIDATED FINANCIAL STATEMENTS BECAUSE OF THE INCLUSION HEREIN OF
REINSURANCE RECEIVABLES OF $12,643 AND $10,919 AT JUNE 30, 1997 AND DECEMBER
31, 1996, RESPECTIVELY.
</FN>
</TABLE>
