<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PHILADELPHIA CONSOLIDATED HOLDING CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
COMMON STOCK, NO PAR VALUE
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PHILADELPHIA CONSOLIDATED HOLDING CORP.
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
[PHILADELPHIA CONSOLIDATED HOLDING CORP. LOGO]
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
To The Holders of Common Stock:
The Annual Meeting of Shareholders of Philadelphia Consolidated Holding
Corp. will be held on May 6, 1999 at 10:00 A.M. at the Marriott West Hotel, 111
Crawford Avenue, Conshohocken, Pennsylvania for the following purposes:
(1) To elect ten Directors;
(2) To vote on the approval of the appointment of independent auditors
for the year 1999; and
(3) To consider such other business as may properly come before the
meeting.
Shareholders of record at the close of business on April 7, 1999 are entitled to
notice of, and to vote at, said meeting.
By Order of the Board of Directors
CRAIG P. KELLER
Secretary
April 8, 1999
<PAGE> 3
PHILADELPHIA CONSOLIDATED HOLDING CORP.
ONE BALA PLAZA, SUITE 100
BALA CYNWYD, PENNSYLVANIA 19004
---------------------
PROXY STATEMENT
---------------------
The accompanying proxy is solicited by the Board of Directors of
Philadelphia Consolidated Holding Corp. (the "Company"), for use at the Annual
Meeting of Shareholders to be held at the Marriott West Hotel, 111 Crawford
Avenue, Conshohocken, Pennsylvania on May 6, 1999 at 10:00 A.M. This Proxy
Statement, the foregoing Notice and the enclosed Proxy are being sent to
shareholders of the Company on or about April 8, 1999.
Any Proxy may be revoked at any time before it is voted by written notice,
mailed or delivered to the Secretary of the Company, by delivering a Proxy
bearing a later date or by attending the meeting and voting in person. If your
proxy card is signed and returned without specifying a vote or an abstention on
any proposal, it will be voted in accordance with the Board of Directors'
recommendations on each proposal.
The Board of Directors knows of no other matters which are likely to be
brought before the meeting other than those specified in the notice thereof. If
any other matters properly come before the meeting however, the persons named in
the enclosed proxy, or their duly constituted substitutes acting at the meeting,
will be authorized to vote or otherwise act thereon in accordance with their
judgement on such matters. If the enclosed proxy is properly executed and
returned prior to voting at the meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. In the absence of
instructions, executed proxies will be voted "FOR" the ten nominees for the
Board of Directors; and "FOR" the approval of the selection by the Board of
Directors of PricewaterhouseCoopers LLP as the Company's independent auditors
for the year 1999.
Shareholders of record at the close of business on April 7, 1999 are
entitled to vote at the meeting. On March 31, 1999, the Company had outstanding
12,219,845 shares of Common Stock, no par value. Each outstanding share of
Common Stock is entitled to one vote and there is no cumulative voting. The
presence, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast on the
particular matter shall constitute a quorum for the purpose of considering such
matter.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock of the Company present in person or represented by proxy
at the meeting, with a quorum present. For purposes of the election of
directors, abstentions and broker non-votes are not considered to be votes cast
and do not affect the plurality vote required for directors.
The Company has retained American Stock Transfer & Trust Company to solicit
proxies by mail, courier, telephone, or facsimile and to request brokerage
houses to forward soliciting material to beneficial owners. For these services
the Company will pay a fee of approximately $4,000.
1. ELECTION OF DIRECTORS
The Board of Directors has nominated for election the ten persons named
below, to hold office until the next Annual Meeting and until their successors
have been duly elected and qualified. The Company believes that each nominee
named below will be able to serve. However, should any such nominee be unable to
serve as a director, the persons named in the proxies have advised that they
will vote for the election of such substitute nominee as the Board of Directors
may propose.
<PAGE> 4
NOMINEES FOR DIRECTOR
The names and ages of the nominees, their principal occupations, lengths of
service as Directors of the Company, and certain other biographical information
are set forth below:
JAMES J. MAGUIRE, age 65, has served as Chief Executive Officer and
Chairman of the Board of Directors of the Company since its formation in 1981
and its subsidiaries since their formation. Mr. Maguire also serves as President
of the Company. He has worked in the insurance industry for over 40 years with
experience in insurance accounting, underwriting, sales and marketing, claims
management and administration.
JAMES J. MAGUIRE, JR., RPLU, age 38, joined the Company in 1996 and has
served on the Board of Directors since 1997. He currently serves as Executive
Vice President and Chief Operating Officer and previous to his appointment to
Executive Vice President and Chief Operating Officer Mr. Maguire, Jr. was Vice
President of Underwriting for the Company. Mr. Maguire, Jr. was previously
employed as Assistant Vice President of Underwriting with American International
Group, Inc., an insurance and financial services company. Mr. Maguire, Jr. is
the son of Mr. James J. Maguire.
SEAN S. SWEENEY, CPCU, RPLU, age 41, joined the Company in 1979 and has
served on the Board of Directors of the Company since 1996. He currently serves
as Executive Vice President, Director of Marketing. Prior to his appointment as
Executive Vice President, he served as Senior Vice President, Director of
Marketing for the Company since 1987. Mr. Sweeney previously was employed by the
Company as a Regional Vice President, Regional Sales Manager, and sales
representative. His current responsibilities include management of all marketing
and sales for the Company. Mr. Sweeney is the nephew of Mr. James J. Maguire.
WILLIAM J. HENRICH, JR., age 70, has served on the Board of Directors since
1996. Mr. Henrich is a senior partner with the law firm of Dilworth, Paxson,
Kalish & Kauffman.
PAUL R. HERTEL, JR., age 71, has served on the Board of Directors of the
Company since 1987. Mr. Hertel has been an insurance broker with Paul Hertel &
Company, Inc., for over 40 years and serves as Chairman of the Executive
Committee of this company.
THOMAS J. JERGER, age 51, currently serves as Chairman of the Board and CEO
of The Jerger Company, Inc., an insurance holding company which through its
subsidiaries markets and underwrites principally mobile homeowners property and
casualty insurance. Mr. Jerger has served in various officer capacities with The
Jerger Company, Inc. and its subsidiaries since 1971.
ROGER L. LARSON, age 77, has served on the Board of Directors of the
Company since 1986. Mr. Larson served in various merchandising capacities for
Sears Roebuck & Co., including Regional Manager, prior to his retirement in
1980.
THOMAS J. MCHUGH, age 67, has served on the Board of Directors of the
Company since 1986. Mr. McHugh has been President, Chairman of the Board, and
CEO of McHugh Associates, Inc., a registered investment advisor, since 1986 and
has served as a director of The Rouse Company, a real estate development
company, since 1980.
MICHAEL J. MORRIS, age 64, has served on the Board of Directors of the
Company since 1993. Mr. Morris served as Chairman and Chief Executive Officer of
Transport International Pool Corporation, a multinational corporation that
principally provides transport services, from 1975 to his retirement in 1992.
J. EUSTACE WOLFINGTON, age 66, has served on the Board of Directors of the
Company since 1986. Since 1981, Mr. Wolfington has been the President of the
H.A.C. Group of Companies, an international automobile leasing consulting firm.
2
<PAGE> 5
ADDITIONAL INFORMATION REGARDING THE BOARD
MEETINGS. During 1998, the Board of Directors met four times. Each
director attended at least 75% of the meetings of the Board of Directors and any
committee on which such director served.
BOARD COMMITTEES. The Audit Committee met one time in 1998. The Committee
consists of Messrs. McHugh (Chairman), Hertel, Jr., Maguire, and Larson. Among
other duties, the Audit Committee recommends the selection of the Company's
independent auditors and reviews the Company's financial condition, and the
scope and results of the independent audit and any internal audit.
The Compensation Committee met one time in 1998. The Compensation Committee
consists of Messrs. Hertel, Jr. (Chairman), Henrich, Jr., Larson and Wolfington.
Among other duties, the Compensation Committee evaluates the performance of
principal officers, recommends to the Board of Directors the selection and
compensation of principal officers, and administers the Company's various
compensation plans.
The Investment Committee met five times in 1998 and is responsible for
monitoring investment policy and activities. The current Investment Committee
consists of Messrs. Morris (Chairman), Maguire, Maguire, Jr., Henrich, Jr., and
Hertel, Jr.
The Nominating Committee met one time in 1998 and currently consists of
Messrs. Henrich, Jr. (Chairman), Maguire, Maguire, Jr., Morris, Sweeney, and
Wolfington. The Nominating Committee is responsible for recommending to the
Board of Directors candidates for nomination to the Board. The Nominating
Committee will consider recommendation of candidates for nomination to the Board
of Directors from shareholders. In order for shareholder recommendations to be
considered for the 2000 Annual Meeting, such recommendations must be received by
the President of the Company at One Bala Plaza, Suite 100, Bala Cynwyd,
Pennsylvania 19004 no later than March 15, 2000. Any recommendation must be
accompanied by the written consent of the individual recommended to serve as a
Director.
RELATED PARTY TRANSACTIONS. On March 31, 1999 the Company entered into a
merger agreement with The Jerger Company, Inc., of which Mr. Thomas J. Jerger
owns approximately one-third of the common stock pursuant to which the Company
would acquire The Jerger Company, Inc. and its subsidiaries, for a purchase
price of $45,000,000 plus an additional sum of up to $5,000,000 based upon
future earnings for the acquired business. Of the purchase price, $20,000,000
plus any contingent consideration will be paid in cash and the balance in the
Company's common stock. Closing is subject to a number of conditions, including
appropriate regulatory approvals. Under the terms of this agreement, upon
closing, Mr. Jerger will enter into a five-year employment agreement with a
subsidiary of the Company. It is anticipated that Mr. Jerger will be considered
at the meeting of the Company's Board, scheduled to be held April 22, 1999, for
election as a Director of the Company. If elected at such meeting, Mr. Jerger
will become a member of the Board as of the date of such meeting.
The Company underwrote mobile homeowners property and casualty insurance in
1998 amounting to approximately $3,900,000 in gross written premiums which was
placed by Mobile Homeowners Insurance Agencies, Inc. (a subsidiary of The Jerger
Company, Inc.) as Managing General Agent. The commission and fees paid to Mobile
Homeowners Insurance Agencies, Inc. by the Company with respect to this business
amounted to $737,000 for 1998.
The Company utilized investment advisory services from McHugh Associates
Inc. of which a board member, Thomas J. McHugh serves as President. The fee for
these services amounted to $189,000 for 1998.
3
<PAGE> 6
MANAGEMENT -- DIRECTORS AND EXECUTIVE OFFICERS
Directors hold office until the next annual meeting of the shareholders, or
until their successors are duly elected and qualified. Officers are elected by
and serve at the discretion of the Board of Directors. The Directors and
Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James J. Maguire............ 65 Chairman of the Board of Directors, Chief Executive
Officer, and President
James J. Maguire, Jr. ...... 38 Director, Executive Vice President and Chief
Operating Officer
Sean S. Sweeney............. 41 Director, Executive Vice President
William J. Henrich, Jr. .... 70 Director
Paul R. Hertel, Jr. ........ 71 Director
Roger L. Larson............. 77 Director
Thomas J. McHugh............ 67 Director
Michael J. Morris........... 64 Director
J. Eustace Wolfington....... 66 Director
Craig P. Keller............. 48 Vice President, Secretary, Treasurer, and Chief
Financial Officer
</TABLE>
See "Nominees for Director" for the biographies of Messrs. Maguire,
Maguire, Jr., Sweeney, Henrich, Hertel, Larson, McHugh, Morris, and Wolfington.
CRAIG P. KELLER, age 48, joined the Company as Vice President and Chief
Financial Officer in December 1992 and was appointed Secretary in July 1993 and
Treasurer in April 1997. Mr. Keller was previously employed by Reliance
Insurance Group, Inc., a subsidiary of Reliance Group Holdings, where he served
in various financial capacities from 1985 through 1992, including Assistant Vice
President from June 1991 to December 1992. Mr. Keller, formerly with Coopers &
Lybrand, L.L.P., is a Certified Public Accountant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 1999 by: (i) each person known to
the Company to own beneficially more than 5% of the outstanding Common Stock;
(ii) each of the Company's nominees for directors and persons referred to in the
Summary Compensation Table; and (iii) all of the directors and officers as a
group. As used in this table, "beneficially owned" means the sole or shared
power to vote or dispose of, or to direct the voting or disposition of, the
shares, or the right to acquire such power within 60 days after March 31, 1999
with respect to any shares.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME(1) OWNED(2) OWNED
------- ------------ ------------
<S> <C> <C>
James J. Maguire............................................ 5,687,464(3) 38.3%
William J. Henrich, Jr. .................................... 6,000 *
Paul R. Hertel, Jr. ........................................ 18,000(4) *
Thomas J. Jerger............................................ 0(5) *
Roger L. Larson............................................. 8,775(6) *
Thomas J. McHugh............................................ 8,000 *
Michael J. Morris........................................... 8,000 *
J. Eustace Wolfington....................................... 412,350 3.4%
Sean S. Sweeney............................................. 84,028 *
Craig P. Keller............................................. 8,260 *
James J. Maguire, Jr. ...................................... 866,897(7) 7.1%
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME(1) OWNED(2) OWNED
------- ------------ ------------
<S> <C> <C>
Thomas G. Maguire........................................... 861,528(8) 7.1%
The Kaufmann Fund, Inc. .................................... 1,286,300(9) 10.5%
FMR Corp. .................................................. 1,172,004(9) 9.6%
The Putnam Advisory Company, Inc. .......................... 504,122(10) 4.1%
Putnam Investment Management, Inc........................... 248,560(10) 2.0%
Philo Smith................................................. 857,900(11) 7.0%
All Directors and Executive Officers as a Group (10
persons).................................................. 7,107,774 47.9%
</TABLE>
- ---------------------------
* Less than 1%
(1) The named shareholders' business address is One Bala Plaza, Suite 100, Bala
Cynwyd, PA 19004, except that, the business address of: The Kaufmann Fund,
Inc. is 140 E. 45th Street, 43rd Floor, New York, NY 10017; FMR Corp. is 82
Devonshire Street, Boston, MA 02109; The Putnam Advisory Company, Inc. and
Putnam Investment Management, Inc. is One Post Office Square, Boston,
Massachusetts 02109; and Philo Smith is 695 East Main Street, Stamford,
Connecticut 06904.
(2) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, unless otherwise noted in the footnotes to this
table and except for shares referred to in the following sentence. With
respect to Mr. James J. Maguire, the shares beneficially owned include
2,613,492 shares subject to currently outstanding options exercisable on or
before 60 days from March 31, 1999.
(3) Of these shares 1,760,500 are owned jointly by Mr. Maguire and his wife
Frances Maguire, as to which Mr. Maguire shares the voting and investment
power with his wife; and 200,000 are owned of record by his wife. Mr.
Maguire disclaims beneficial ownership of the 200,000 shares owned of
record by his wife.
(4) Record owner is P&E Limited Partnership, a family limited partnership of
which Mr. Hertel and his wife are general partners. Mr. Hertel has shared
voting and investment power with his wife with respect to these shares.
(5) On March 31, 1999 the Company entered into a merger agreement to acquire
The Jerger Company, Inc. as described in the "Related Party Transactions"
disclosure of this Proxy Statement. Mr. Jerger owns approximately one-third
of the common stock of The Jerger Company, Inc. and upon closing of this
transaction will receive approximately one-third of the $25,000,000 portion
of the purchase price consideration to be issued in shares of the Company's
common stock.
(6) Record owner is the Roger L. Larson Trust which is controlled by Roger L.
Larson and his wife as co-trustees. Mr. Larson has shared voting and
investment power with his wife with respect to these shares.
(7) Of the shares shown, 110,816 shares are owned by a trust for the benefit of
Mr. James J. Maguire, Jr. and 750,712 shares are in trusts for the other
children of Mr. James J. Maguire, of which Mr. James J. Maguire, Jr. is
deemed to be beneficial owner of such shares because he has shared voting
and investment power of such shares as co-trustee of these trusts.
(8) These shares are owned by trusts for the children of Mr. James J. Maguire
and Mr. Thomas G. Maguire is deemed to be beneficial owner of such shares
because he has shared voting and investment power of such shares as
co-trustee of these trusts.
(9) According to the Schedules 13G filed with the Company by The Kaufmann Fund,
Inc., FMR Corp., Putnam Investments, Inc. (parent company to The Putnam
Advisory Company, Inc. and Putnam Investment Management, Inc.),
respectively, these shares were acquired in the ordinary course of
business, were not acquired for the purpose of and do not have the effect
of changing or influencing the control of the issuer of such securities and
were not acquired in connection with, or as a participant in, any
transaction having such purposes or effect.
5
<PAGE> 8
(10) These companies, The Putnam Advisory Company, Inc. and Putnam Investment
Management, Inc., which are affiliates of, and owned by, Putnam
Investments, Inc. beneficially own in the aggregate 752,682 shares (6.2%).
(11) According to the Schedule 13D filed with the Company by Philo Smith these
shares have been acquired for investment. Such Schedule 13D indicates that
Mr. Smith has shared voting and investment power with respect to these
shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
and changes in ownership with the Securities and Exchange Commissioner ("SEC").
Officers, directors, and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, for
the period January1, 1998 through December 31, 1998, or its knowledge that no
Forms 5 were required for certain reporting persons, the Company believes that
all filing requirements applicable to its officers and directors were complied
with, except for one late filing of a Form 4, reporting one transaction for Mr.
William J. Henrich, Jr.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during each of the last three years
to the Company's Chief Executive Officer, and each of the Company's other
executive officers whose salary and bonus exceeded $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------
ANNUAL NUMBER OF
COMPENSATION SHARES UNDERLYING
-------------------- -------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) SARS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James J. Maguire, Chief 1998 812,557 500,000 -- -- 192,006(2)(4)
Executive Officer, President, 1997 775,000 500,000(1) -- -- 208,179(2)(4)
and Chairman of the Board 1996 775,000 500,000(1) -- -- 210,259(2)(4)
James J. Maguire, Jr., Director, 1998 170,250 50,000 -- -- 12,919(2)(3)
Executive Vice President and 1997 150,000 30,708 -- -- 9,297(2)(3)
Chief Operating Officer 1996 77,885(5) 41,500 202,900(7) -- 59,795(2)(6)
Sean S. Sweeney, Director and 1998 174,685 131,177 -- -- 8,831(2)
Executive Vice President 1997 170,000 113,021 -- 100,000(7) 9,776(2)
1996 155,000 50,000 100,000(7) -- 16,764(2)
Craig P. Keller, Vice President, 1998 168,712 20,000 25,000 -- 11,483(2)(3)
Secretary, Treasurer, and 1997 150,000 20,000 -- -- 14,240(2)(3)
Chief Financial Officer 1996 127,677 20,000 -- 12,500(7) 13,673(2)(3)
</TABLE>
- ---------------
(1) Paid in part in year shown; advanced on account, in part, in prior year.
(2) Includes both matching and profit sharing contributions by the Company under
its defined contribution plan, as well as premiums paid on term life
insurance policies.
(3) Includes the discount from the fair market value of the Company's common
stock purchased pursuant to the Company's Employee Stock Purchase Plan.
(4) Pursuant to an agreement between the Company and a trust created by Mr.
James J. Maguire and his wife, Frances M. Maguire, the Trust has purchased a
split-dollar life insurance policy on the joint lives of Mr. Maguire and his
wife. Under the agreement, the Company pays the premium on the policy and
the
6
<PAGE> 9
trust is the beneficiary of the insurance policy. However, the Company has
been granted a security interest in the death benefit of the policy equal to
the sum of all premium payments made by the Company. The arrangement is
designed so that if the assumptions made as to mortality experience, policy
dividends and other factors are realized, the Company, upon the death of the
survivor of Mr. Maguire and his wife or the surrender of the policy, will
recover all of its insurance premium payments which do not include certain
amounts paid to Mr. Maguire, as described below. The premium paid by the
Company in 1998 and 1997 pursuant to this arrangement was $338,174. The
amount in this column does not include such premium payment. However, the
amount in this column includes the sum of each future years' present value
of the imputed interest on such premium payment (adjusted for the cost of
term insurance based upon the joint lives of Mr. Maguire and his wife). The
interest amount calculated for 1998 and 1997 is $172,294 and $190,630,
respectively. Pursuant to the split dollar arrangement described above, Mr.
Maguire receives each year an amount equal to the portion of the annual
premium due and payable on the life insurance policy which is not paid by
the Company pursuant to the above described formula, but paid by Mr.
Maguire. The amount reported in this column included said amount totaling
$7,026 and $5,939 in 1998 and 1997, respectively.
(5) Mr. Maguire, Jr. began his employment with the Company in June 1996.
(6) Of this amount, $57,104 was a reimbursement of relocation expenses
(7) Restated to reflect a two for one stock split of the Company's common stock
distributed in November 1997.
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options during 1998 to the Company's Chief Executive Officer and each of the
Company's executive officers whose total annual salary and bonus exceeded
$100,000. There were no stock appreciation rights ("SARs") granted in 1998 for
the named persons.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
NO. OF SHARES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM($)
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED(1) IN 1998 ($/SHARE) DATE 5% 10%
---- ------------- ------------ ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
James J. Maguire............... -- -- -- -- -- --
Craig P. Keller................ 25,000 9.6% $20.500 7/7/08 141,600 312,900
</TABLE>
- ---------------
(1) Options are exercisable after the fifth anniversary from date of grant.
7
<PAGE> 10
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information relating to the number and value
of options and SARs held at December 31, 1998 by the Company's Chief Executive
Officer and by each of the Company's other executive officers whose total annual
salary and bonus exceeded $100,000 for 1998. There were no option/SAR exercises
in 1998 for the named persons.
OPTION/SAR VALUES AT DECEMBER 31, 1998(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James J. Maguire(2)....................... 2,613,492 -- 52,319,000 --
James J. Maguire, Jr.(3).................. -- 202,900 -- 2,703,500
Sean S. Sweeney(4)........................ -- 200,000 -- 2,262,500
Craig P. Keller(5)........................ -- 37,500 -- 195,300
</TABLE>
- ---------------
(1) All share and per share amounts granted prior to November 1997 were restated
to reflect a two for one split of the Company's common stock distributed in
November 1997.
(2) Exercise price of $2.606.
(3) Exercise price of $8.500 for 2,900 options; $9.313 for 200,000 options.
(4) Exercise price of $8.125 for 100,000 options; Base price of $14.50 for
100,000 SARs.
(5) Exercise price of $20.500 for 25,000 options; Base price of $11.250 for
12,500 SARs.
DIRECTORS COMPENSATION
Non-employee directors receive annual compensation of $18,000, plus $1,000
for each Board meeting attended and $500 for each Committee meeting attended.
Non-employee directors may designate a portion of their fees to be used for the
purchase of shares of the Company's common stock under the terms of the
Directors Stock Purchase Plan.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for administering the compensation program for the Company's
executives including the executive officers named in the Summary Compensation
Table. The Committee is composed exclusively of independent, non-employee
directors who are not eligible to participate in any of the Company's executive
compensation programs. All decisions by the Committee relating to the
compensation of the Company's executive officers are reviewed by the Board of
Directors.
COMPENSATION PHILOSOPHY. The Company's executive compensation program is
based upon a pay-for-performance philosophy. The Company is committed to a
strong link between its business and strategic goals and its compensation
program. The financial goals for certain elements of the compensation program
are reviewed and approved by the Board in conjunction with its approval of the
Company's strategic and operating plans.
BASE SALARY. An executive's base salary is determined by an assessment of
his or her sustained performance, experience, scope and job demands, as well as
current salary levels at peer companies. While some of these companies are in
the Nasdaq Insurance Stocks Index and some are not, these were generally
selected for the peer group because they were considered comparable to the
Company either in terms of
8
<PAGE> 11
market capitalization, or because they compete with, or are in lines of business
related to, the Company's business.
ANNUAL INCENTIVES. The Company utilizes cash bonuses as a principal method
of tying compensation to performance. For 1998, the Company awarded Mr. Maguire
a cash bonus calculated based on an earnings per share formula, with other
executives receiving a predetermined amount of a calculated bonus pool which was
also based upon an earnings per share formula, and with respect to marketing
executives, was also based upon production and profitability goals. The Company
believes that the cash bonus creates a direct link between the Company's
profitability and the compensation of executives. Incentive compensation is also
provided by the Company's Amended and Restated Employees' Stock Option Plan (the
"Stock Option Plan") and the awarding of Stock Appreciation Rights.
RATIONALE FOR CHIEF EXECUTIVE OFFICER COMPENSATION. In setting Mr.
Maguire's 1998 base salary and bonus, the Compensation Committee considered,
among other factors, compensation levels for chief executive officers of other
peer specialty property and casualty insurance companies, Mr. Maguire's
experience and knowledge of the industry and the favorable developments achieved
by the Company in 1997 under Mr. Maguire's leadership, including $16,900,000 of
net operating income, the maintenance of the rating from A.M. Best Company for
the Company's insurance subsidiaries, the introduction of certain new insurance
programs, the continued expansion of the Company's marketing organization, and
the continued development of the Preferred Agent program.
POLICY ON DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal
Revenue Code ("Section 162(m)") limits to $1.0 million the annual tax deduction
for compensation paid to the Chief Executive Officer and any of the four highest
paid other executive officers unless certain requirements for performance-based
compensation are met. The Compensation Committee considered these requirements
and designed the Cash Bonus Plan of the Chief Executive Officer and the Stock
Option Plan, accordingly. The Committee currently intends to continue to comply
with the requirements of Section 162(m) but reserves the right to alter the Cash
Bonus Plan and the Stock Option Plan if it believes that doing so would be in
the best interests of the Company and its shareholders.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
PAUL R. HERTEL, JR., CHAIRMAN
WILLIAM J. HENRICH, JR.
ROGER L. LARSON
J. EUSTACE WOLFINGTON
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STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of the NASDAQ Stock
Market (U.S.) ("NASDAQ -- US") Index and the NASDAQ Insurance Stocks Index (SIC
Codes 631 and 633) ("NASDAQ -- INS"). The comparison begins on December 31,
1993.
<TABLE>
<CAPTION>
PHILADELPHIA CONSOLIDATED THE NASDAQ STOCK
HOLDING CORP. MARKET (US) NASDAQ INSURANCE STOCKS
------------------------- ---------------- -----------------------
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 102.08 97.75 94.13
1995 135.42 138.26 133.71
1996 193.75 170.01 152.42
1997 295.83 208.58 223.58
1998 377.08 293.21 198.78
</TABLE>
2. APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to the shareholders' approval, the Board of Directors has appointed
the firm of PricewaterhouseCoopers LLP, which served as the Company's
independent auditors for the year 1998, to serve as the Company's independent
auditors for the year 1999. If the shareholders do not approve this appointment
by the affirmative vote of a majority of shares present in person or represented
by proxy at the meeting, other independent auditors will be considered by the
Board.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the meeting and will have the opportunity to make a statement if the
representative desires to do so. The representative is also expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSALS OF SHAREHOLDERS
It is currently contemplated that the Company's 2000 Annual Meeting of
Shareholders will be held on May 4, 2000. In order to be set forth in the
Company's Proxy Statement for such meeting, shareholder proposals must be
received by the President of the Company at One Bala Plaza, Suite 100, Bala
Cynwyd, Pennsylvania 19004, no later than December 7, 1999.
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<PAGE> 13
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
PHILADELPHIA CONSOLIDATED HOLDING CORP.
The undersigned shareholder hereby appoints James J. Maguire and Craig P.
Keller, or either one of them, the proxies of the undersigned, with full power
of substitution, to vote all the shares of common stock of Philadelphia
Consolidated Holding Corp. standing in the name of the undersigned at the close
of business on April 7, 1999 at the Annual Meeting of Shareholders of the
Company to be held on Thursday, May 6, 1999 at 10:00 a.m. EDT and at any and
all adjournments thereof, with all the powers the undersigned would possess if
the undersigned were present.
The undersigned shareholder instructs the proxies to vote as specified on this
proxy on the matters described in the Company's Proxy Statement dated April 8,
1999. Proxies will be voted as instructed.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
COMPANY'S NOMINEES AS DIRECTORS (INCLUDING THE ELECTION OF ANY PERSON TO THE
BOARD OF DIRECTORS WHERE A NOMINEE NAMED IN THE PROXY STATEMENT IS UNABLE OR
WILL NOT SERVE), AND FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS.
BY EXECUTION OF THIS PROXY, THE UNDERSIGNED SHAREHOLDER CONFERS UPON THE
ABOVE-APPOINTED PROXIES THE DISCRETIONARY AUTHORITY TO VOTE UPON ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of the Proxy Statement and Notice of said
meeting, both dated April 8, 1999, and the Company's 1998 Annual Report to
Shareholders.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE> 14
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<CAPTION>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
PHILADELPHIA CONSOLIDATED HOLDING CORP.
MAY 6, 1999
Please Detach and Mail in the Envelope Provided
<S> <C> <C> <C>
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD NOMINEES: William J. Henrich, Jr. FOR AGAINST ABSTAIN
1. ELECTION OF [ ] [ ] Paul R. Hertel, Jr. 2. APPOINTMENT OF AUDITORS [ ] [ ] [ ]
DIRECTORS Thomas J. Jerger Appointment of PricewaterhouseCoopers
Roger L. Larson LLP as independent auditors for the
For, except vote withheld from the James J. Maguire, Sr. fiscal year ending December 31, 1999.
following nominee(s) James J. Maguire, Jr.
Thomas J. McHugh THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THIS PROXY SHALL BE
__________________________________ Michael J. Morris VALID AND MAY BE VOTED WHETHER OR NOT THE SHAREHOLDER'S NAME
Sean S. Sweeney IS SET FORTH BELOW OR A SEAL IS AFFIXED OR THE DESCRIPTION,
__________________________________ J. Eustace Wolfington AUTHORITY OR CAPACITY OF THE PERSON SIGNING IS GIVEN OR OTHER
DEFECT OF SIGNATURE EXISTS.
Signature of Shareholder(s) _________________________________________________________ DATE ___________________________________ 1999
Note: Please sign your name exactly as it appears hereon. When signing as attorney-in-fact, executor, administrator, trustee, or
guardian, add you title as such, and if signer is a corporation, please sign with full corporate name by duly
authorized officer or officers and affix the corporate seal. Where stock is issued in the name of two or more persons, all
such persons should sign.
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