<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 September 30, 1999
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 November 11, 1999.
Preferred Stock, $.01 par value, no shares outstanding Common Stock, no par
value, 12,536,438 shares outstanding
<PAGE> 2
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
INDEX
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
Part I - Financial Information
Consolidated Balance Sheets - September 30, 1999 and
December 31, 1998 3
Consolidated Statements of Operations - For the three
and nine months ended September 30, 1999 and 1998 4
Consolidated Statements of Comprehensive Income - For
the three and nine months ended September 30, 1999 and 1998 5
Consolidated Statements of Changes in Shareholders' Equity - For the
nine months ended September 30, 1999 and year ended
December 31, 1998 6
Consolidated Statements of Cash Flows - For the nine
months ended September 30, 1999 and 1998 7-8
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis of Results of Operations and
Financial Condition 10-15
Part II - Other Information 16
Signatures 17
Exhibits 18
</TABLE>
2
<PAGE> 3
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
As of
-----------------------------
September 30, December 31,
1999 1998
---- ----
(Unaudited)
ASSETS
INVESTMENTS:
<S> <C> <C>
FIXED MATURITIES AVAILABLE FOR SALE AT MARKET
(AMORTIZED COST $310,568 AND $278,557) ....... $ 304,501 $ 283,718
EQUITY SECURITIES AT MARKET (COST $42,241
AND $43,441) ................................. 64,157 72,768
--------- ---------
TOTAL INVESTMENTS .......................... 368,658 356,486
CASH AND CASH EQUIVALENTS ...................... 45,579 31,573
ACCRUED INVESTMENT INCOME ...................... 4,088 3,771
PREMIUMS RECEIVABLE ............................ 30,399 27,769
PREPAID REINSURANCE PREMIUMS AND
REINSURANCE RECEIVABLES ........................ 53,301 22,892
DEFERRED ACQUISITION COSTS ..................... 24,443 16,853
PROPERTY AND EQUIPMENT ......................... 10,015 4,877
GOODWILL-LESS ACCUMULATED AMORTIZATION
OF $2,064 AND $1,669 ......................... 29,254 416
OTHER ASSETS ................................... 7,041 4,561
--------- ---------
TOTAL ASSETS ................................. $ 572,778 $ 469,198
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
POLICY LIABILITIES AND ACCRUALS:
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES ....... $ 186,111 $ 151,150
UNEARNED PREMIUMS .............................. 109,884 64,787
--------- ---------
TOTAL POLICY LIABILITIES AND ACCRUALS ...... 295,995 215,937
PREMIUMS PAYABLE ............................... 5,614
OTHER LIABILITIES .............................. 17,651 9,463
DEFERRED INCOME TAXES .......................... 504 7,410
--------- ---------
TOTAL LIABILITIES ............................ 319,764 232,810
--------- ---------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES:
COMPANY OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST HOLDING
SOLELY DEBENTURES OF COMPANY ................... 98,905 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, 13,368,597 AND
12,330,825 SHARES ISSUED ..................... 69,322 44,796
NOTES RECEIVABLE FROM SHAREHOLDERS ............. (1,681) (1,680)
ACCUMULATED OTHER COMPREHENSIVE INCOME ......... 10,302 22,417
RETAINED EARNINGS .............................. 89,712 74,923
LESS COST OF COMMON STOCK HELD IN TREASURY,
860,403 AND 130,262 SHARES ................... (13,546) (2,973)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ................. 154,109 137,483
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........ $ 572,778 $ 469,198
========= =========
</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 Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
REVENUE:
<S> <C> <C> <C> <C>
NET WRITTEN PREMIUMS .............................. $ 49,180 $ 41,681 $ 137,467 $ 104,359
CHANGE IN NET UNEARNED PREMIUMS
(INCREASE) ..................................... (3,972) (9,516) (16,342) (15,617)
------------ ------------ ------------ ------------
NET EARNED PREMIUMS ............................... 45,208 32,165 121,125 88,742
NET INVESTMENT INCOME ............................. 5,411 4,446 15,261 10,876
NET REALIZED INVESTMENT GAIN ...................... 48 1,609 5,241 1,708
OTHER INCOME ...................................... 1,999 57 1,999 171
------------ ------------ ------------ ------------
TOTAL REVENUE ................................... 52,666 38,277 143,626 101,497
------------ ------------ ------------ ------------
LOSSES AND EXPENSES:
LOSS AND LOSS ADJUSTMENT EXPENSES ................. 40,082 20,034 87,578 53,661
NET REINSURANCE RECOVERIES ........................ (7,430) (2,596) (13,049) (5,416)
------------ ------------ ------------ ------------
NET LOSS AND LOSS ADJUSTMENT EXPENSES ............. 32,652 17,438 74,529 48,245
ACQUISITION COSTS AND OTHER
UNDERWRITING EXPENSES ........................ 14,958 10,159 38,822 27,565
OTHER OPERATING EXPENSES .......................... 2,728 530 4,024 1,715
------------ ------------ ------------ ------------
TOTAL LOSSES AND EXPENSES ....................... 50,338 28,127 117,375 77,525
------------ ------------ ------------ ------------
MINORITY INTEREST: DISTRIBUTIONS ON COMPANY OBLIGATED
MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST ..................................... 1,811 1,742 5,434 2,959
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ........................... 517 8,408 20,817 21,013
------------ ------------ ------------ ------------
INCOME TAX EXPENSE (BENEFIT):
CURRENT ........................................... (476) 2,363 5,987 5,826
DEFERRED .......................................... 381 (31) 41 (248)
------------ ------------ ------------ ------------
TOTAL INCOME TAX EXPENSE (BENEFIT) .............. (95) 2,332 6,028 5,578
------------ ------------ ------------ ------------
NET INCOME ...................................... $ 612 $ 6,076 $ 14,789 $ 15,435
============ ============ ============ ============
PER AVERAGE SHARE DATA:
BASIC EARNINGS PER SHARE .......................... $ 0.05 $ 0.50 $ 1.19 $ 1.26
============ ============ ============ ============
DILUTED EARNINGS PER SHARE ........................ $ 0.04 $ 0.41 $ 0.97 $ 1.03
============ ============ ============ ============
WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING ....................................... 12,964,320 12,248,331 12,472,743 12,269,595
WEIGHTED-AVERAGE SHARE EQUIVALENTS
OUTSTANDING ....................................... 2,688,167 2,713,348 2,794,694 2,680,099
------------ ------------ ------------ ------------
WEIGHTED-AVERAGE SHARES AND SHARE
EQUIVALENTS OUTSTANDING ........................... 15,652,487 14,961,679 15,267,437 14,949,694
============ ============ ============ ============
</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 COMPREHENSIVE INCOME
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
----- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME ......................................................... $ 612 $ 6,076 $ 14,789 $ 15,435
-------- -------- -------- --------
OTHER COMPREHENSIVE LOSS, NET OF TAX:
HOLDING GAIN (LOSS) ARISING DURING PERIOD, NET OF TAX OF ($2,206)
AND ($4,689) FOR 1999, AND ($1,585) AND $336 FOR 1998 ............ (4,097) (2,943) (8,708) 624
RECLASSIFICATION ADJUSTMENT, NET OF TAX OF
$17 AND $1,834 FOR 1999, AND $563 AND $598 FOR
1998 ............................................................ (31) (1,046) (3,407) (1,110)
-------- -------- -------- --------
OTHER COMPREHENSIVE LOSS ........................................... (4,128) (3,989) (12,115) (486)
-------- -------- -------- --------
COMPREHENSIVE INCOME (LOSS) ........................................ $ (3,516) $ 2,087 $ 2,674 $ 14,949
======== ======== ======== ========
</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 CHANGES
IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
For the Nine Months For the Year Ended
Ended September 30, December 31,
1999 1998
---- ----
(Unaudited)
COMMON STOCK:
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD ................. $ 44,796 $ 42,788
ISSUANCE OF SHARES PURSUANT TO ACQUISITION
AGREEMENT .................................... 25,000
ISSUANCE OF SHARES PURSUANT TO EMPLOYEE
STOCK PURCHASE PLAN .......................... (48) 853
EXERCISE OF EMPLOYEE STOCK OPTIONS, NET OF
TAX BENEFIT .................................. (426) 597
PURCHASE CONTRACTS OF COMMON STOCK ............. 558
--------- ---------
BALANCE AT END OF PERIOD ................... 69,322 44,796
--------- ---------
NOTES RECEIVABLE FROM SHAREHOLDERS:
BALANCE AT BEGINNING OF PERIOD ................. (1,680) (1,422)
NOTES RECEIVABLE ISSUED PURSUANT TO
EMPLOYEE STOCK PURCHASE PLAN ................. (539) (828)
SHARES FORFEITED PURSUANT TO EMPLOYEE STOCK
PURCHASE PLAN ................................ 50
COLLECTION OF NOTES RECEIVABLE ................. 488 570
--------- ---------
BALANCE AT END OF PERIOD ................... (1,681) (1,680)
--------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
BALANCE AT BEGINNING OF PERIOD ............... 22,417 15,023
CHANGE IN UNREALIZED INVESTMENT APPRECIATION
(DEPRECIATION), NET OF DEFERRED INCOME TAXES (12,115) 7,394
--------- ---------
BALANCE AT END OF PERIOD ................... 10,302 22,417
--------- ---------
RETAINED EARNINGS:
BALANCE AT BEGINNING OF PERIOD ................. 74,923 54,895
NET INCOME ..................................... 14,789 20,028
--------- ---------
BALANCE AT END OF PERIOD ................... 89,712 74,923
--------- ---------
COMMON STOCK HELD IN TREASURY:
BALANCE AT BEGINNING OF PERIOD ................. (2,973)
COMMON SHARES REPURCHASED ...................... (11,933) (3,100)
ISSUANCE OF SHARES PURSUANT TO EMPLOYEE
STOCK PURCHASE PLAN .......................... 645
EXERCISE OF EMPLOYEE STOCK OPTIONS, NET OF
TAX BENEFIT .................................. 798 127
SHARES FORFEITED PURSUANT TO EMPLOYEE STOCK
PURCHASE PLAN ................................ (83)
--------- ---------
BALANCE AT END OF PERIOD ................... (13,546) (2,973)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ................. $ 154,109 $ 137,483
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME............................................. $ 14,789 $ 15,435
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
NET REALIZED INVESTMENT GAIN ......................... (5,241) (1,708)
DEPRECIATION AND AMORTIZATION EXPENSE................. 2,066 918
DEFERRED INCOME TAX EXPENSE (BENEFIT)................. 41 (248)
CHANGE IN PREMIUMS RECEIVABLE......................... 431 (10,993)
CHANGE IN OTHER RECEIVABLES........................... (23,601) (2,120)
CHANGE IN DEFERRED ACQUISITION COSTS.................. (5,109) (4,459)
CHANGE IN OTHER ASSETS................................ (2,218) (405)
CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT
EXPENSES.............................................. 31,638 18,759
CHANGE IN UNEARNED PREMIUMS........................... 28,351 17,607
CHANGE IN OTHER LIABILITIES........................... 4,655 1,966
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 45,802 34,752
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF INVESTMENTS IN FIXED
MATURITIES AVAILABLE FOR SALE....................... 69,644 50,874
PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED
MATURITIES AVAILABLE FOR SALE....................... 32,799 12,276
PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY
SECURITIES.......................................... 28,162 5,958
COST OF FIXED MATURITIES AVAILABLE FOR
SALE ACQUIRED....................................... (122,949) (159,111)
COST OF EQUITY SECURITIES ACQUIRED...................... (20,287) (23,795)
PAYMENT FOR ACQUISITION, NET OF CASH ACQUIRED........... (7,372)
PURCHASE OF PROPERTY AND EQUIPMENT...................... (1,920) (1,383)
------------ -----------
NET CASH USED BY INVESTING ACTIVITIES............... (21,923) (115,181)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM OFFERING OF COMPANY OBLIGATED
MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUST................................ 99,463
EXERCISE OF EMPLOYEE STOCK OPTIONS, NET
OF TAX BENEFIT........................................ 373 409
COLLECTION OF NOTES RECEIVABLE.......................... 488 415
PROCEEDS FROM SHARES PURSUANT TO
EMPLOYEE STOCK PURCHASE PLAN.......................... 24 38
COST OF COMMON STOCK REPURCHASED........................ (10,758) (3,100)
------------ -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES........................... (9,873) 97,225
------------ ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................. 14,006 16,796
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... 31,573 11,933
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................. $ 45,579 $ 28,729
=========== ==========
CASH PAID DURING THE PERIOD FOR:
INCOME TAXES............................................ $ 7,232 $ 5,184
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
ISSUANCE OF SHARES PURSUANT TO EMPLOYEE
STOCK PURCHASE PLAN IN EXCHANGE FOR
NOTES RECEIVABLE...................................... $ 488 $ 849
</TABLE>
7
<PAGE> 8
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
(Continued)
<TABLE>
<S> <C>
ACQUISITIONS
FAIR VALUE OF ASSETS ACQUIRED $ 77,310
CASH PAID (25,676)
COMMON STOCK ISSUED (25,000)
-------
LIABILITIES ASSUMED $ 26,634
======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE> 9
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 nine months ended
September 30, 1999 and 1998 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 nine
months ended September 30, 1999 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 as of and for the year ended December 31, 1998
included in the Company's Annual Report on Form 10-K.
2. Acquisitions
On July 16, 1999, Philadelphia Consolidated Holding Corp. (the "Company")
closed on its acquisition of The Jerger Company, Inc. and Subsidiaries
("Jerger") (producers and underwriters of highly specialized mobile home
and homeowners property and casualty business) through a merger for a
purchase price of $45,000,000, and a contingent additional amount of up to
$5,000,000 based upon the future earnings for the acquired business. Of the
purchase price, $20,000,000 was paid in cash and the balance in 1,037,772
shares of common stock of the Company. Any contingent additional amount
will be paid in cash. The acquisition is being accounted for using the
purchase method of accounting.
3. Goodwill
Goodwill resulting from the acquisition of Jerger amounted to $29.2
million. This amount represents the excess of acquisition costs over the
fair value of net assets acquired. Goodwill is being amortized on a
straight-line basis over 20 years.
4. 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.
5. 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.
6. Subsequent Event
During the period October 15, 1999 to October 16, 1999, Hurricane Irene
struck Florida's southwest and eastern coast. As a result of this
hurricane, the Company estimates property catastrophe losses in the range
of $2.4 million to $2.8 million.
9
<PAGE> 10
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 (NINE MONTHS ENDED SEPTEMBER 30, 1999 VS. SEPTEMBER 30,
1998)
Premiums: Gross written premiums grew $60.8 million (42.3%) to $204.4
million for the nine months ended September 30, 1999 from $143.6 million for the
same period of 1998; gross earned premiums grew $50.8 million (40.3%) to $176.8
million for the nine months ended September 30, 1999 from $126.0 million for the
same period of 1998; net written premiums increased $33.1 million (31.7%) to
$137.5 million for the nine months ended September 30, 1999 from $104.4 million
for the same period of 1998; and net earned premiums grew $32.4 million (36.5%)
to $121.1 million in 1999 from $88.7 million in 1998. The overall growth in
premiums is primarily attributable to the following factors:
- - Expansion of marketing efforts relating to commercial package, specialty
lines and specialty property and inland marine products through the
increase in the Company's field organization of approximately 36% to a
total of 187 professionals. The respective gross written and net written
premium increases for commercial package, specialty lines and specialty
property and inland marine products for the nine months ended September 30,
1999 vs. 1998 amount to $7.5 million and $5.0 million for commercial
package, $14.7 million and $12.1 million for specialty lines, and $18.2
million and $9.2 million for specialty property and inland marine.
- - The acquisition of The Jerger Company, Inc. ("Jerger") which closed in the
third quarter 1999, resulting in an increase of $12.9 million and $8.4
million in gross and net mobile homeowners, preferred homeowners and
Federal Flood written premiums, respectively.
- - An account which the Company initially underwrote commencing July, 1998 for
its commercial excess liability product resulted in an increase in gross
and net written premiums of approximately $3.3 million and $0.8 million,
respectively.
Overall premium growth has been offset in part by the Company's
decision not to renew policies in the nursing home and assisting living niches
due to inadequate pricing levels being experienced as a result of market
competition and loss experience emerging at higher than expected levels. As a
result, the aggregate total gross written and net written premiums for the
nursing home and assisting living facility products decreased by $7.0 million
and $6.6 million, respectively.
10
<PAGE> 11
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Net Investment Income: Net investment income approximated $15.3 million
for the nine months ended September 30, 1999 and $10.9 million for the same
period of 1998. Total investments grew to $368.7 million at September 30, 1999
from $335.3 million at September 30, 1998, primarily due to investing the
proceeds from the Company's May 1998 FELINE PRIDES(SM) securities offering and
cash flows provided from operating activities.
Net Realized Investment Gain: Net realized investment gains were $5.2
million for the nine months ended September 30, 1999 and $1.7 million for the
same period in 1998. This increase was due primarily to the sale of certain
equity securities which produced realized gains amounting to $6.0 million. The
decision to sell equity investments was made so as to lessen the Company's
holdings in certain common stock positions as well as decrease the overall
percentage of investments in common stock securities. The proceeds from the
common stock sales are being reinvested in fixed maturity securities to increase
current investment income.
Other Income: Other income increased $1.8 million to $2.0 million for
the nine months ended September 30, 1999 from $0.2 million for the same period
of 1998. This increase is due to the acquisition of Jerger, which closed in the
third quarter 1999, and is primarily attributed to commissions earned by Jerger
on homeowners business produced for an unaffiliated insurance company.
Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $26.3 million (54.6%) to $74.5 million for the nine months
ended September 30, 1999 from $48.2 million for the same period of 1998 and the
loss ratio increased to 61.5% in 1999 from 54.4% in 1998. The increase in net
loss and loss adjustment expenses was due to the following: a $5.0 million
increase to unpaid loss and loss adjustment expenses for Nursing Home and
Assisted Living commercial multi peril package policies which had been issued in
prior periods due to an increase in the incidence and amount of claims under the
general liability coverage of these policies; $3.4 million for unpaid loss and
loss adjustment expenses related to property catastrophe losses resulting from
Hurricane Floyd and Arizona storms occurring during the third quarter; and a
36.5% growth in net earned premiums.
Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $11.2 million (40.6%) to $38.8 million
for the nine months ended September 30, 1999 from $27.6 million for the same
period of 1998. This increase is due primarily to the growth in net earned
premiums.
Other Operating Expenses: Other operating expenses increased $2.3
million to $4.0 million for the nine months ended September 30, 1999 from $1.7
million for the same period of 1998. This increase is due to the acquisition of
Jerger, which closed in the third quarter 1999, and is primarily attributed to
the operating expenses of the agency operations of Jerger.
Income Tax Expense: The Company's effective tax rate for the nine
months ended September 30, 1999 and 1998 was 29.0% and 26.6%, respectively. The
effective rates differed from the 35% statutory rate principally due to
investments in tax-exempt securities. The increase in the effective tax rate is
principally due to the greater relative percentage investment in taxable
securities versus tax-exempt securities.
RESULTS OF OPERATIONS (THREE MONTHS ENDED SEPTEMBER 30, 1999 VS. SEPTEMBER 30,
1998)
Premiums: Gross written premiums grew $25.5 million (44.1%) to $83.3
million for the three months ended September 30, 1999 from $57.8 million for the
same period of 1998; gross earned premiums grew $24.4 million (51.3%) to $72.0
million for the three months ended September 30, 1999 from $47.6 million for the
same period of 1998; net written premiums increased $7.5 million (18.0%) to
$49.2 million for the three months ended September 30, 1999 from $41.7 million
for the same period of 1998; and net earned premiums grew $13.0 million (40.4%)
to $45.2 million in 1999 from $32.2 million in 1998. The overall growth in
premiums are primarily attributable to the following:
- - Expansion of marketing efforts relating to commercial package, and
specialty lines products through an approximate 36% increase in the
Company's field organization to a total of 187 professionals. The
respective gross written and net written premium increases for commercial
package, and specialty line products for the three months ended September
30, 1999 and 1998 amounted to $5.2 million and $4.0 million for commercial
package, and $4.4 million and $3.7 million for specialty line products.
11
<PAGE> 12
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
- - The acquisition of Jerger which closed in the third quarter 1999, resulting
in an increase of $7.8 million and $3.8 million in gross and net mobile
homeowners, preferred homeowners and Federal Flood written premiums,
respectively.
- - The continued development and growth of the Company's Specialty Property
and Inland Marine underwriting organization, which was initiated in 1998.
The respective gross written premium increase amounted to $6.2 million and
the Company's Specialty Property and Inland Marine products did not
significantly add to the increase in net written premiums.
Overall premium growth has been offset in part by the Company's
decision not to renew policies in the nursing home and assisting living niches
due to inadequate pricing levels being experienced as a result of market
competition and loss experience emerging at higher than expected levels. As a
result, the aggregate total gross written and net written premiums for the
nursing home and assisting living facility products decreased by $2.8 million
and $2.5 million, respectively.
Net Investment Income: Net investment income approximated $5.4 million
for the three months ended September 30, 1999 and $4.4 million for the same
period of 1998. Total investments grew to $368.7 million at September 30, 1999
from $335.3 million at September 30, 1998, primarily due to cash flows provided
from operating activities.
Net Realized Investment Gain: Net realized investment gains were
$48,000 for the three months ended September 30, 1999 and $1.6 million for the
same period of 1998. During the third quarter of 1998, the Company realigned the
maturity distribution of certain of its tax-exempt and taxable securities in
order to increase after tax investment income.
Other Income: Other income increased $1.9 million to $2.0 million for
the three months ended September 30, 1999 from $0.1 million for the same period
of 1998. This increase is due to the acquisition of Jerger, which closed in the
third quarter 1999, and is primarily attributed to commissions earned by Jerger
on homeowners business produced for an unaffiliated insurance company.
Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $15.3 million (87.9%) to $32.7 million for the three months
ended September 30, 1999 from $17.4 million for the same period of 1998 and the
loss ratio increased to 72.2% in 1999 from 54.2% in 1998. The increase in net
loss and loss adjustment expenses was due to the following: a $5.0 million
increase to unpaid loss and loss adjustment expenses for Nursing Home and
Assisted Living commercial multi peril package policies which had been issued in
prior periods due to an increase in the incidence and amount of claims under the
general liability coverage of these policies; a $3.4 million to unpaid loss and
loss adjustment expenses for property catastrophe losses resulting from
Hurricane Floyd and Arizona storms occurring during the third quarter; and a
40.4% growth in net earned premiums.
Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $4.8 million (47.1%) to $15.0 million
for the three months ended September 30, 1999 from $10.2 million for the same
period of 1998. This increase was due primarily to the growth in net earned
premiums.
Other Operating Expenses: Other operating expenses increased $2.2
million to $2.7 million for the three months ended September 30, 1999 from $0.5
million for the same period of 1998. This increase is due to the acquisition of
Jerger, which closed in the third quarter 1999, and is primarily attributed to
the operating expenses of the agency operations of Jerger.
Income Tax Expense: The Company's effective tax rate for the three
months ended September 30, 1999, excluding the tax benefit of $2.9 million as a
result of the $8.4 million increase in unpaid loss and loss adjustment expenses
as described in the above "Net Loss and Loss Adjustment Expenses" caption, was
31.7% vs. 27.7% for the three months ended September 30, 1998. The increase is
principally due to the greater relative percentage investment in taxable
securities versus tax exempt securities.
12
<PAGE> 13
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1999 the Company's investments
experienced unrealized investment depreciation of $12.1 million, net of the
related deferred tax benefit of $6.5 million. At September 30, 1999, the Company
had total investments with a carrying value of $368.7 million, of which 82.6%
consisted of investments in 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
collateralized mortgage securities and asset backed securities consist of short
tranche securities possessing favorable pre-payment risk profiles. The remaining
17.4% of the Company's total investments consisted primarily of publicly traded
common stock securities.
In July 1999 the Company closed on its acquisition of Jerger. With
respect to this acquisition, $25,675,000 of cash was paid, $20,000,000 in
purchase price and $5,675,000 to pay off certain obligations at closing.
On September 9, 1999, the Company's Board of Directors authorized the
repurchase of an additional $20.0 million of the Company's Common Stock. This
authorization is in addition to the previously announced $10.0 million Common
Stock buyback authorization. The purchases are made from time to time in the
open market or through privately negotiated transactions. The Company purchased
709,746 shares of common stock during the third quarter 1999 for $11,933,000.
Capital raised from the Company's May 1998 Feline Prides securities
offering was the source for the above discussed cash payments.
The Company produced net cash from operations of $45.8 million and
$34.8 million, respectively, for the nine months ended September 30, 1999 and
1998. 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.
YEAR 2000 READINESS DISCLOSURE
Many existing computer programs use only two digits, instead of four,
to identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create incorrect results on
or after the Year 2000. The "Year 2000" issue affects computer and information
technology systems, as well as non-information technology systems which include
embedded technology such as micro-processors and micro-controllers (or
micro-chips) that have date sensitive programs that may not properly recognize
the year 2000 or beyond. If the systems and products the Company uses are not
properly equipped to identify and recognize the year 2000, information
technology systems and non-information technology systems could fail or create
erroneous results.
The Company has completed a Year 2000 readiness assessment of
information technology systems and non-information technology systems and have
repaired or replaced systems or components of systems that have been identified
as Year 2000 non-compliant. This process was completed during the first quarter
of 1999 as anticipated by the Company. The Company is not aware of any remaining
Year 2000 issues with respect to systems that is reasonably likely to have a
material adverse effect on operations or financial condition.
13
<PAGE> 14
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The Company has also completed a Year 2000 readiness assessment of
material third parties with whom significant business relationships are
maintained. This process was completed during the second quarter of 1999 as
anticipated by the Company. The Company is not aware of any remaining Year 2000
issues with respect to material third parties that is reasonably likely to have
a material adverse effect on operations or financial conditions. However, the
Company is not in a position to determine whether in fact such third parties
will be affected by Year 2000 issues.
The total cost associated with required modifications to become Year
2000 compliant has not had a material effect on the Company's operations or
financial condition. The total amount expended on the project through September
30, 1999 was approximately $125,000, which related primarily to the "IT Systems"
and "Non-IT Systems" section. This amount came from the Company's operating
funds.
The Company has not established contingency plans for non-compliance of
its "IT Systems" or "Non-IT Systems" since the Company has completed its "IT
Systems" and "Non-IT Systems" assessments and have repaired or replaced systems
or components of systems that have been identified as Year 2000 non-compliant.
The Company is not aware of any remaining Year 2000 issues with respect to such
assessments that is reasonably likely to have a material adverse effect on
operating or financial condition. The Company's review of the "Third Parties"
section was completed by June 30, 1999 as anticipated. Presently, the Company is
not aware of any major "Third Party" issues. To the extent that the Company
becomes aware of a non-compliant material "Third Party" a contingency plan would
be developed which would potentially include replacing non-compliant material
"Third Party" vendors or suppliers.
The Company uses computer systems in virtually all aspects of its
business and maintains relationships with a number of vendors, suppliers and
customers whose own state of readiness with regard to the Year 2000 issue could
potentially have an impact. These parties include software, hardware, and
telecommunication providers, banks and investment brokers, reinsurers and
reinsurance intermediaries, certain agents and utilities. The failure to correct
a material Year 2000 issue or a material third party issue could adversely
impact operations, liquidity, and financial position. Due to the uncertainty
inherent in the Year 2000 issue, the Company is unable to determine whether the
consequences of Year 2000 failures will have a material impact on the statement
of operations, liquidity or financial position. However, it is believed that
with the completion of the Year 2000 project the risk of significant
interruptions of operations should be reduced.
Additionally, the Company issues professional liability coverage,
including directors and officers liability, and commercial multi-peril insurance
policies. Coverage under certain of these policies may cover losses suffered by
insureds as a result of the Year 2000 issues. Professional liability policies
are written on a "claim made and reported" basis. Since early 1997 approximately
50% of these policies have included a Year 2000 exclusion endorsement. The
Company includes a Year 2000 exclusion endorsement on virtually all new or
renewing professional liability policies providing coverage effective January 1,
1999 and thereafter. On occasion, for qualifying accounts, the Company's
underwriters may remove the exclusion after receipt and review of a satisfactory
supplemental application (which includes a warranty statement) and other
underwriting information. With respect to commercial multi-peril policies, the
Company believes that it should not be held liable for claims arising from the
Year 2000 issue under comprehensive general liability policies. However, the
Company cannot determine whether or to what extent courts may find liability for
such claims. Additionally, expenses could be incurred to contest Year 2000 issue
coverage claims, even if the Company prevails in its position. As a result, it
cannot presently be determined what, if any, insurance exposure ultimately
exists for Year 2000 issue claims.
There can be no assurances that such Year 2000 issues will not
materially adversely affect the Company.
14
<PAGE> 15
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
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 and growth, the impact of Year 2000
issues, 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 impact of Year 2000 issues,
including the matters referred to above.
15
<PAGE> 16
PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
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. Exhibits
Exhibit No. Description
10.43 Registration Rights Agreement dated July 9,
1999 with Thomas Jerger, Dean Jerger, Richard
M. Jerger, Jr., and Evelyn W. Jerger
11.0 Computation of Earnings Per Share
b. The Company filed the following reports on Form 8-K during the
quarterly period ended September 30, 1999:
<TABLE>
<CAPTION>
Date of Report Item Reported
-------------- -------------
<S> <C>
July 29, 1999 Acquisition of The Jerger Company, Inc.
September 29, 1999 Amendment No. 1 to Form 8-K as filed July 29, 1999
</TABLE>
16
<PAGE> 17
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 12, 1999 /s/ James J. Maguire
-------------------- ------------------------------------
James J. Maguire
Chairman of the Board of Directors,
and Chief Executive Officer
(Principal Executive Officer)
Date November 12, 1999 /s/ Craig P. Keller
-------------------- ------------------------------------
Craig P. Keller
Senior Vice President, Secretary,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
17
<PAGE> 1
EXHIBIT 10.43
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of July
9, 1999, is made by and among Philadelphia Consolidated Holding Corp., a
Pennsylvania corporation (the "Company"), and Thomas Jerger, Dean Jerger,
Richard M. Jerger, Jr. and Evelyn W. Jerger (each, a "Holder" and, collectively,
the "Holders").
INTRODUCTION
------------
A. A Plan and Agreement of Merger, dated as of March 31, 1999,
has been entered into by and among the Company, TJC Acquisition Corp., a
Delaware corporation (the "Merger Sub"), The Jerger Company, Inc., a Florida
corporation ("Jerger") and the Holders other than Evelyn W. Jerger (the "Merger
Agreement").
B. Under the terms of the Merger Agreement, in addition to the
other consideration contemplated thereunder, the Holders will be issued in the
aggregate a certain number (the "Shares") of shares of the Common Stock (as
defined below). The number of Shares issued to each Holder shall be set forth
opposite the respective names of the Holders on Schedule 1 hereto. The issuances
of the Shares to the Holders have not been registered under the Securities Act
(as defined below).
C. In order to induce the Company and the Merger Sub to enter
into the Merger Agreement and to induce the Holders to enter into the Merger
Agreement and to consummate the transactions contemplated thereby, the Holders
and the Company hereby agree that this Agreement shall govern the rights and
obligations of the Holders and the Company with respect to registration under
the Securities Act of the Shares and certain other matters as set forth herein.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound, the parties hereto agree as follows:
Section 1. Definitions.
The following terms shall have the following meanings
unless the context otherwise indicates:
(a) "Available Registration" means any time during which:
(i) the Resale Registration Statement is effective, current in its disclosure
and available for the registered resale of Shares in a transaction that is not
registered under the Securities Act and (ii) the Company has not exercised any
of its rights hereunder to require the Holders to defer or suspend their
reliance on or other use of any such registration statement or to otherwise
defer or suspend any resales of the Shares.
(b) "Business Day" means any day that is not a Saturday
or Sunday or a day on which federal banking institutions in Philadelphia,
Pennsylvania are authorized or required by law or executive order to close.
<PAGE> 2
(c) "Closing Date" means the date of the Closing (as
defined in the Merger Agreement).
(d) "Closing Date Anniversary" means the first Business
Day that is on or after the one-year anniversary of the Closing Date.
(e) "Common Stock" means the common stock, no par value,
of the Company.
(f) "Company" has the meaning given in the Preamble
hereto.
(g) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(h) "Form S-3" means such form under the Securities Act
as in effect on the date hereof or any registration form or procedure under the
Securities Act, available for the transactions contemplated herein, that is
subsequently adopted by the SEC and permits inclusion or incorporation of
substantial information by reference to other documents filed, and to be filed
prospectively, by the Company with the SEC.
(i) The terms "Holder" and "Holders" have the meanings
given in the Preamble hereto.
(j) The terms "Indemnified Person" and "Indemnified
Persons" have the meaning given in Section 7 hereof.
(k) "Merger Agreement" has the meaning given in the
Recitals hereto.
(l) "Merger Sub" has the meaning given in the Recitals
hereto.
(m) "Minimum Amount" means the number of Shares that
constitutes greater than 50% of the Shares.
(n) "Nasdaq" means the Nasdaq National Market operated by
The Nasdaq Stock Market, Inc.
(o) "NYSE" means the New York Stock Exchange, Inc.
(p) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
by the SEC of the effectiveness of such registration statement.
(q) "Registration Expenses" means all expenses incurred
by the Company in complying with Section 2 hereof, including without limitation
all registration and filing fees, printing expense, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws (other than those which by law must be paid by the
selling security holders), fees of securities exchanges or the National
Association of Securities Dealers, Inc., fees of transfer agents and registrars,
but excluding any Selling Expenses.
<PAGE> 3
(r) "Registration Request" means a request by notice to
the Company pursuant to Section 2 hereof for Resale Registration of the Shares.
(s) "Required Effectiveness Period" means a period of
[TWO] years after the Resale Registration Statement first affords an Available
Registration (such period to be extended for an additional number of Business
Days equal to the number of Business Days during such period on which the right
of any applicable Holder to sell Shares was suspended pursuant to Section 3(c)
hereof); provided, however, that the Company may, in its sole discretion,
terminate the Required Effectiveness Period prior to the end of the period set
forth in the first clause of this paragraph if, at any time after the first
anniversary of the date on which the Resale Registration Statement becomes
effective, each Holder of the Shares with respect to which the Resale
Registration Statement has been filed would be permitted, under Rule 144
promulgated under the Securities Act, to sell all of such Holder's Shares during
any three month period.
(t) "Resale Registration" means the registration by the
Company, on the Resale Registration Statement, pursuant to the Securities Act,
of the Shares.
(u) "Resale Registration Statement" means a registration
statement on Form S-3, registering, pursuant to Rule 415 under the Securities
Act, or any successor provision, the resale of Shares by the Holders.
(v) "SEC" means the United States Securities and Exchange
Commission.
(w) "Securities Act" means the Securities Act of 1933, as
amended.
(x) "Selling Expenses" means all expenses related to the
registration or sale of the Shares, other than the Registration Expenses,
including, without limitation, all selling commissions and transfer taxes
applicable to the sale of the Shares and any legal fees and expenses of counsel
or other advisers and agents of the Holders of the Shares being registered.
(y) "Shares" has the meaning given in the Recitals
hereto.
(z) "Trading Day" means any Business Day on whichever of
the NYSE or Nasdaq is, as of such Business Day, the principal market for the
Common Stock, is open for trading.
Section 2. Resale Registration.
(a) At any time after the Closing Date, Holders of the
Minimum Amount may submit a Registration Request for Resale Registration. Such
Registration Request shall state the number of Shares to be registered and the
intended plan of distribution thereof. The Company shall be obligated to file a
Resale Registration Statement pursuant to this Section 2 on only one occasion.
The Company shall be deemed to have satisfied its obligation under this Section
2
3
<PAGE> 4
with respect to a Registration Request for Resale Registration if a Resale
Registration Statement becomes effective under the Securities Act and remains
effective for the applicable Required Effectiveness Period, or if the failure of
the Resale Registration Statement relating to such Registration Request for
Resale Registration to become or remain effective for such Required
Effectiveness Period results primarily from any action or inaction of a Holder
whose Shares are included in such Resale Registration Statement.
(b) Upon receipt of a Registration Request for Resale
Registration, and upon the compliance by the Holders submitting such
Registration Request with Section 6(b) hereof, and subject to the conditions and
limitations of Section 3 hereof, the Company will use its commercially
reasonable efforts to file a Resale Registration Statement as promptly as
practicable. The Company shall give notice of any Registration Request for
Resale Registration to all Holders who did not join therein and such Holders may
become additional parties to such Registration Request for Resale Registration
by giving the Company notice of their joinder within 10 days after the date of
such notice by the Company.
(c) The Company shall use commercially reasonable efforts
to maintain the effectiveness of the Resale Registration Statement for the
Required Effectiveness Period, provided that Rule 415 promulgated under the
Securities Act, or any successor rule promulgated under the Securities Act,
permits an offering on a continuous or delayed basis.
Section 3. Registration Procedures.
(a) The right to a Resale Registration is subject to the
following conditions and limitations:
(i) Any individual Holder joining a Registration
Request may withdraw such Holder's Shares from the Registration Request at any
time prior to the time the registration statement becomes effective, provided
that the Company may ignore a notice of withdrawal made within 24 hours of the
time the registration statement becomes effective. Following such a withdrawal,
the Company shall not take any further action to register the withdrawn Shares,
and shall not be obligated to register any Shares if the number of non-withdrawn
Shares is less than the Minimum Amount. However, except as otherwise provided in
Section 3(b) hereof, a Registration Request, once made, shall count as having
been made for purposes of Section 2(a) hereof, unless it is withdrawn by all
Holders making such request within five days after having been made.
(ii) No Registration Request may be made within
90 days after (i) the effective date of a registration statement filed by the
Company under the Securities Act covering a public offering of its equity
securities or (ii) the date of a prospectus filed by the Company under the
Securities Act in connection with a public offering of its equity securities.
(iii) The Company shall be permitted to use any
registration form available to it for the registration of Shares, and shall not
be obligated to include in the prospectus any information that may be
incorporated by reference or that is not required to be included therein by the
applicable registration form.
4
<PAGE> 5
(b) If the Company is required by the provisions of
Section 2 hereof to effect Resale Registration of any Shares, the Company will,
as promptly as practicable:
(i) To the extent required by Section 2, and in
accordance with the provisions thereof, prepare and file with the SEC a
registration statement (which shall be on Form S-3, unless the Company does not
qualify for use of Form S-3 in such registration, in which case such
registration statement shall be on any other available form selected by the
Company) with respect to such Shares and thereafter use commercially reasonable
efforts to cause such registration statement to become effective as promptly as
practicable.
(ii) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for the Required Effectiveness Period or such lesser period
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all Shares covered by such registration statement
in accordance with the plan of distribution set forth in such registration
statement.
(iii) Furnish to each Holder who has made the
Registration Request pursuant to which the Company effects the
applicable registration statement such number of conformed copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus) as each such Holder reasonably may request in order to
facilitate the public sale of the Shares covered by such registration statement.
(iv) Upon receipt of such confidentiality
agreements as the Company may reasonably request, make available for inspection
by each seller of Shares and any attorney, accountant or other agent retained by
any such seller, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company officers, directors and
employees to supply all information reasonably requested by any such seller,
attorney, accountant or agent in connection with such registration statement,
that in each case is necessary in order to confirm material disclosures
contained in the registration statement or incorporated therein by reference;
provided, that any such inspection shall occur during normal business hours, and
that no such inspection or request need be allowed if it would present an
unreasonable burden to the Company.
(vii) Give the selling holders of Shares two days
advance notice of its anticipated filing date of the registration statement and
amendments thereto.
(viii) Use commercially reasonable efforts to
cause the Shares covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Shares.
(ix) Comply with all applicable rules and
regulations of the SEC.
5
<PAGE> 6
(x) Provide a transfer agent for all the Shares
covered by such registration statement not later than the effective date of such
registration statement.
(xi) Permit any holder of Shares covered by such
registration statement, who in the reasonable judgment of such holder might be
deemed to be a controlling person of the Company, to participate through counsel
reasonably acceptable to the Company in the preparation of such registration
statement and, if specifically requested by such counsel, in discussions between
the Company and the SEC with respect to such registration statement, and to
include in such registration statement material, furnished to the Company in
writing, which in the written opinion of such counsel is necessary to include in
order to avoid potential liability for such holder.
(xii) Use commercially reasonable efforts to
cause all such Shares covered by such registration statement to be listed or
quoted on the principal national securities exchange (including Nasdaq) on which
similar securities issued by the Company are then listed or quoted, if the
listing or quoting of such Shares is then permitted under the rules of such
exchange.
(xiii) If there is a stop order relating to or
suspension of the effectiveness of the registration statement, use its
commercially reasonable efforts to have the stop order or suspension of
effectiveness withdrawn as promptly as practicable.
(xiv) Use commercially reasonable efforts to
register or qualify the Shares covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the sellers of Shares
reasonably shall request; provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process or taxation in any such jurisdiction.
(c) Notwithstanding the foregoing, the Company may delay
filing a registration statement otherwise required to be filed pursuant to this
Agreement, and may withhold efforts to cause a registration statement covering
Shares to become effective, if the Company determines in good faith that such
registration statement might (i) interfere with or affect the negotiation or
completion of any transaction that is being contemplated by the Company (whether
or not a final decision has been made to undertake such transaction) at the time
the right to delay is exercised, or (ii) involve initial or continuing
disclosure obligations that might not be in the best interest of the Company's
stockholders; provided, however, the Company may not delay filing such
registration statement or withhold efforts to cause such registration statement
to become effective for a period of more than one hundred twenty (120) days in
the aggregate. If, after a registration statement becomes effective, the Company
gives notice to the Holders of Shares covered by such registration statement
that the Company considers it appropriate for the registration statement to be
amended or supplemented, the Holders of such Shares shall suspend any further
sales of their Shares until the Company gives notice to such Holders that the
registration statement has been amended or supplemented. The Company agrees with
the Holders that it will use its commercially reasonable efforts to amend or
supplement the registration statement, as required to permit sales of the Shares
covered thereby
6
<PAGE> 7
to resume as promptly as is practicable after it has given the notice referred
to in the preceding sentence. In no event will the Company be required to update
the registration statement after the date that its obligation to register Shares
terminates pursuant to Section 5 hereof.
(d) In connection with each registration hereunder, each
seller of Shares shall (i) furnish promptly to the Company in writing such
information with respect to such seller and the proposed distribution by such
seller as reasonably shall be requested by the Company in order to assure
compliance with federal and applicable state securities laws, and (ii) comply
with all applicable rules promulgated by the SEC or any securities exchange
(including Nasdaq).
(e) If any registration statement covering Shares refers
to any Holder by name or otherwise as the holder of any securities of the
Company, then such Holder shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to the Company (such
satisfaction not to be withheld unreasonably), to the effect that such Holder's
holding of Shares is not to be construed as a recommendation by such Holder of
the investment quality of the Shares covered thereby and that such holding does
not imply that such Holder will assist in meeting any future financial
requirements of the Company, or (ii) in the event that such reference to such
Holder by name or otherwise is not in the judgment of the Company, as advised by
counsel, required by the Securities Act or any similar federal statute or any
state "blue sky" or securities law then in force, the deletion of the reference
to such Holder.
Section 4. Expenses. The Company will pay all Registration
Expenses. All Selling Expenses shall be borne by the participating Holders, in
proportion to the number of Shares sold by each unless they otherwise agree
among themselves.
Section 5. Termination of Registration Rights. Notwithstanding
the foregoing provisions, the Company's obligation to register Shares under this
Agreement shall terminate as to any particular Shares (a) when such Shares have
been sold in an offering registered under the Securities Act or in a sale exempt
from registration under the Securities Act, (b) when such Shares shall have been
effectively registered under the Securities Act for the Required Effectiveness
Period, or (c) when a written opinion, to the effect that such Shares may be
sold without registration under the Securities Act or applicable state law and
without restriction as to the quantity and manner of such sales, shall have been
received from counsel for the Company, which counsel is reasonably acceptable to
the owner of such Shares.
Section 6. Indemnification.
(a) In the event of any registration of Shares under the
Securities Act pursuant to this Agreement, the Company will, and hereby does,
indemnify and hold harmless, to the fullest extent permitted by law, the seller
of any Shares covered by such registration statement, its directors and officers
or general and limited partners (and the directors and officers thereof) and
each other person, if any, who controls such seller within the meaning of the
Securities Act (each, individually, an "Indemnified Person" and, collectively,
the "Indemnified Persons"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses (including fees of counsel and any
amounts paid in any settlement effected with the Company's consent, which
consent shall not be unreasonably withheld) to which such Indemnified Persons
may
7
<PAGE> 8
become subject under the Securities Act, common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof), or expenses arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which Shares were registered
under the Securities Act or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the SEC any amendment thereof or supplement thereto), or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or (iii)
any violation by the Company of any federal or state rule or regulation
applicable to the Company and relating to action required of or inaction by the
Company in connection with any such registration. The Company will reimburse
Indemnified Persons for any reasonable legal or any other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, liability, action or proceeding. Notwithstanding the foregoing, the
Company shall not be liable to any Indemnified Person to the extent that any
such loss, claim, damage, liability (or action or proceeding, whether commenced
or threatened, in respect thereof or expense arises out of or is based upon (i)
any untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Indemnified Person, for use in the
preparation of the registration statement or (ii) the failure of any Indemnified
Person to comply with any legal requirement applicable to any Indemnified Person
to deliver a copy of a prospectus or any supplements or amendments thereto after
the Company has made such documents available to such persons in requisite
quantity on a timely basis to permit such delivery, and it is established that
delivery of such prospectus, supplement or amendment would have cured the defect
giving rise to such loss, claim, damage, liability or expense. Such indemnity
and reimbursement of expenses shall remain in full force and effect following
the transfer of Shares by such seller.
(b) The Company, as a condition to including any Shares
in any registration statement filed in accordance with this Agreement, shall
have received an undertaking reasonably satisfactory to it from the prospective
seller of such Shares, to indemnify and hold harmless (in the same manner and to
the same extent as set forth in Section 6(a) hereof) the Company and its
directors and officers and each person controlling the Company within the
meaning of the Securities Act and all other prospective sellers and their
directors, officers, general and limited partners and respective controlling
persons with respect to any statement or alleged statement in or omission from
such registration statement, any final or summary prospectus contained therein,
or any amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of such seller for use in the preparation of such registration statement.
Notwithstanding the above, the amount of any losses, claims, damages,
liabilities, or expenses to be paid by any seller of Shares shall not exceed the
amount of proceeds received by such seller of Shares from the sale of such
Shares.
8
<PAGE> 9
(c) Promptly after receipt by an Indemnified Person
hereunder of notice of the commencement of any action or proceeding with respect
to which a claim for indemnification may be made pursuant to this Section 6,
such Indemnified Person will, if a claim in respect thereof is to be made
against an indemnifying party, give notice to the latter of the commencement of
such action; provided, however, that the failure of any Indemnified Person to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 6, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. If any such claim
or action shall be brought against an Indemnified Person, and it shall give
notice to the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein, and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the Indemnified Person; and provided
further that the indemnifying party shall not be entitled to so participate or
so assume the defense if, in the Indemnified Person's reasonable judgment, a
conflict of interest between the Indemnified Person and the indemnifying party
exists in respect of such claim. After notice from the indemnifying party to
such Indemnified Person of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the Indemnified Person
under this Section 6 for any legal or other expenses subsequently incurred by
the Indemnified Person in connection with the defense thereof unless the
indemnifying party has failed to assume the defense of such claim or to employ
counsel reasonably satisfactory to such Indemnified Person; and provided
further, that the Indemnified Persons shall have the right to employ one counsel
to represent such Indemnified Persons if, in such Indemnified Persons'
reasonable judgment, a conflict of interest between the Indemnified Persons and
the indemnifying parties exists in respect of such claim, and in that event the
fees and expenses of such separate counsel shall be paid by the indemnifying
party; and provided further, that if, in the reasonable judgment of any of the
Indemnified Persons, a conflict of interest between such Indemnified Person and
any other Indemnified Person exist in respect of such claims, such Indemnified
Person shall be entitled to additional counsel or counsels and the indemnifying
party shall be obligated to pay the fees and expenses of such additional counsel
or counsels. No Indemnified Person will consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimants or plaintiffs to such Indemnified Person of
a release from all liability in respect to such claim or litigation. No
indemnifying party will be liable for any settlement effected without its prior
written consent.
(d) If the indemnification provided for in this Section 6
is unavailable or insufficient to hold harmless an Indemnified Person under
Section 6(a) and Section 6(b) hereof, then each indemnifying party shall
contribute to the amount paid or payable by such Indemnified Person as a result
of the losses, claims, damages or liabilities referred to in Section 6(a) and
Section 6(b) hereof in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the Indemnified Person on
the other hand in connection with statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission.
9
<PAGE> 10
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 6 were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the first sentence of this Section
6. The amount paid by an Indemnified Person as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this Section 6 shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Person in connection with investigating or defending any action or
claim (which shall be limited as provided in Section 6(c) hereof if the
indemnifying party has assumed the defense of any such action in accordance with
the provisions thereof which is the subject of this Section 6). No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The provisions of this Section 6 shall be in addition
to any other rights to indemnification or contribution which any Indemnified
Person may have pursuant to law or contract and shall remain in full force and
effect following the transfer of the Shares by any such party.
Section 7. Compliance with Rule 144. At the request of any
holder of Shares who proposes to sell Shares in compliance with Rule 144 under
the Securities Act, or any similar Rule, the Company shall forthwith furnish to
such holder a written statement as to its compliance with the filing
requirements of the SEC as set forth in such Rule. In addition, until such time
as the Shares may be sold under Rule 144(k) the Company will make and keep
public information available, as those items are understood and defined in Rule
144 and Rule 144A promulgated under the Securities Act.
Section 8. Miscellaneous
(a) Binding and Benefit. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that no party may assign or transfer its rights
or obligations under this Agreement without the prior written consent of the
other parties hereto.
(b) Communications from Holders. If Shares are owned of
record jointly by two or more persons, the Company may rely on any communication
signed by one such person. The Company may ignore communications given by
persons who purport to own Shares beneficially unless such communications are
confirmed by a record owner, and it may ignore any communications from a record
owner that conflict with previously received communications from another person
who is at the relevant time also a record owner of the same Shares.
(c) Amendment and Waiver. Any provision of this Agreement
may be amended and the observance thereof may be waived only with the written
consent of the Company and each of the Holders. Failure of any party to exercise
any right or remedy under this Agreement or otherwise, or delayed by a party in
exercising such right or remedy, will not operate as a waiver thereof.
10
<PAGE> 11
(d) Notices. Whenever notice is required to be given to
any person under this Agreement, it shall be in writing and may be given to the
person either personally or by sending a copy thereof by first class or express
mail, postage prepaid, or by courier service, charges prepaid, or by facsimile
transmission, to such person's address (or to such person's facsimile number) as
set forth below. If the notice is sent by mail or courier service, it shall be
deemed to have been given to the person to whom it is sent when deposited in the
United States mail or with a courier service for delivery to that person. If the
notice is sent by facsimile transmission, it shall be deemed to have been given
to the person to whom it is sent when the person sending such notice receives
electronic confirmation of receipt by the person to whom such notice was sent.
If to the Company or the Merger Sub:
Philadelphia Consolidated Holding Corp.
One Bala Plaza, Suite 100
Bala Cynwyd, PA 19004
Attn: James J. Maguire
Telephone: (610) 617-7900
Telecopy: (610) 617-7600
with a copy sent in the
manner provided to:
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 South Fifteenth Street
Philadelphia, Pennsylvania 19102
Attention: Michael M. Sherman, Esquire
Telephone: (215) 977-2236
Telecopy: (215) 977-2334
or, if sent after July 1, 1999:
Wolf, Block, Schorr and Solis-Cohen LLP
1650 Arch Street
Philadelphia, PA 19103-2085
Attn: Michael M. Sherman, Esquire
and
11
<PAGE> 12
If to any Holder:
c/o
----------------------
-------------------------
-------------------------
Attention:
--------------------
Telephone: ( )
--- --------
Telecopy: ( )
--- --------
with a copy sent in the
manner provided to:
Fowler, White, Gilleni, Boggs, Villareal and Baker, P.A.
501 E. Kennedy Blvd.
Suite 1700
Tampa, Florida 33602
Attention: David Shobe, Esquire
Telephone: (813) 228-7411
Telecopy: (813) 229-8313
or at such other address as each party furnishes by notice
given in accordance with this section.
(e) Governing Law. This Agreement shall be enforced,
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, notwithstanding any conflicts of laws provisions to the contrary.
(f) Merger. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
and there are no representations, promises, warranties or other undertakings
other than those set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(g) Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context indicates is appropriate.
(h) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. If executed in multiple
counterparts, this Agreement shall become binding when two or more counterparts
hereto, individually or taken together, bear the signatures of all of the
parties reflected hereon as the signatories. This Agreement, once executed by a
party, may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
12
<PAGE> 13
(i) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that any other provision may be invalid or unenforceable in whole or in part for
any reason.
(j) Amendments and Modifications. This Agreement may not
be amended or modified other than by an agreement in writing signed by all of
the parties.
(k) Number of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on any day that is not a Business Day, then the final day shall be
deemed to be the next day which is a Business Day.
(l) Further Assurances. Each of the parties hereto agrees
to execute and deliver all such other instruments and take all such other action
as any party may reasonably request from time to time, before or after the
Closing Date and without payment of further consideration, in order to
effectuate the transactions provided for herein. The parties shall cooperate
fully with each other and with their respective counsel and accountants in
connection with any steps required to be taken as part of their respective
obligations under this Agreement.
(m) Headings. The headings in the Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
PHILADELPHIA CONSOLIDATED HOLDING CORP.
By: /s/ Craig P. Keller
---------------------------
Name: Craig P. Keller
Title: V.P.
HOLDERS:
/s/ Thomas Jerger
---------------------------
Thomas Jerger
/s/ Dean Jerger
---------------------------
Dean Jerger
/s/ Richard M. Jerger, Jr.
---------------------------
Richard M. Jerger, Jr.
/s/ Evelyn W. Jerger
---------------------------
Evelyn W. Jerger
14
<PAGE> 15
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Name Number
of Holder of Shares
--------- ---------
<S> <C>
Thomas J. Jerger 338,404
Dean W. Jerger 338,404
Richard M. Jerger, Jr. 338,404
Evelyn W. Jerger, as trustee of the
Evelyn W. Jerger Revocable Trust
u/a/d 3/23/9215 22,560
</TABLE>
15
<PAGE> 1
EXHIBIT 11
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 Three As of and For the Nine
Months Ended Months Ended
September 30, September 30
------------- ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted-Average Common Shares Outstanding 12,964 12,248 12,473 12,270
Weighted-Average Share Equivalents Outstanding 2,688 2,713 2,795 2,680
------- ------- ------- -------
Weighted-Average Shares and Share
Equivalents Outstanding 15,652 14,961 15,268 14,950
======= ======= ======= =======
Net Income $ 612 $ 6,076 $14,789 $15,435
======= ======= ======= =======
Basic Earnings per Share $ 0.05 $ 0.50 $ 1.19 $ 1.26
======= ======= ======= =======
Diluted Earnings per Share $ 0.04 $ 0.41 $ 0.97 $ 1.03
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 304,501
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 64,157
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 368,658
<CASH> 45,579
<RECOVER-REINSURE> 3,906
<DEFERRED-ACQUISITION> 24,443
<TOTAL-ASSETS> 572,778
<POLICY-LOSSES> 186,111
<UNEARNED-PREMIUMS> 109,884
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 69,322
<OTHER-SE> 84,787
<TOTAL-LIABILITY-AND-EQUITY> 572,778
121,125
<INVESTMENT-INCOME> 15,261
<INVESTMENT-GAINS> 5,241
<OTHER-INCOME> 1,999
<BENEFITS> 74,529
<UNDERWRITING-AMORTIZATION> 38,822
<UNDERWRITING-OTHER> 4,024
<INCOME-PRETAX> 20,817
<INCOME-TAX> 6,028
<INCOME-CONTINUING> 14,789
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,789
<EPS-BASIC> 1.19
<EPS-DILUTED> 0.97
<RESERVE-OPEN> 137,204<F1><F2>
<PROVISION-CURRENT> 74,529
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 17,154
<PAYMENTS-PRIOR> 31,658
<RESERVE-CLOSE> 162,921<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 $23,190 AND $16,120 AT SEPTEMBER 30, 1999 AND
DECEMBER 31, 1998, RESPECTIVELY.
<F2>BEGINNING OF YEAR BALANCE INCLUDES UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES OF
$2,174 AS A RESULT OF THE ACQUISITION OF THE JERGER COMPANY, INC. ON JULY 16,
1999.
</FN>
</TABLE>
