<PAGE>
================================================================================

                                   FORM 10-K
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                   For the Fiscal Year Ended December 31, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the Transition Period from          to
                                   ----------  ----------

                         COMMISSION FILE NUMBER: 0-22280

                     PHILADELPHIA CONSOLIDATED HOLDING CORP.
             (Exact name of registrant as specified in its charter)


          PENNSYLVANIA                                   23-2202671
(State or other jurisdiction of              (IRS Employer Identification No.)
 incorporation or organization)

      ONE BALA PLAZA, SUITE 100
      BALA CYNWYD, Pennsylvania                             19004
(Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (610) 617-7900

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                           COMMON STOCK, NO PAR VALUE
                                (Title of Class)

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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

                                YES: [ ] NO: [X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 21,
2002 as reported on the NASDAQ National Market System, was $463,818,905. Shares
of Common Stock held by each executive officer and director and by each person
who is known by the Registrant to beneficially own 5% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

As of March 22, 2002, Registrant had outstanding 21,558,334 shares of Common
Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

(1)  Portions of the definitive Proxy Statement for Registrant's 2002 Annual
     Meeting of Shareholders to be held May 1, 2002 are incorporated by
     reference in Part III.

================================================================================

                                       1
<PAGE>
                                     PART I

Item 1. BUSINESS

GENERAL

     As used in this Annual Report on Form 10-K, (i) "Philadelphia Insurance"
refers to Philadelphia Consolidated Holding Corp., (ii) the "Company" refers to
Philadelphia Insurance and its subsidiaries, doing business as Philadelphia
Insurance Companies; (iii) the "Insurance Subsidiaries" refers to Philadelphia
Indemnity Insurance Company ("PIIC"), Philadelphia Insurance Company ("PIC"),
Mobile USA Insurance Company ("MUSA") and Liberty American Insurance Company
("LAIC"), collectively; (iv) "MIA" refers to Maguire Insurance Agency, Inc., a
captive underwriting manager; (v) "MHIA" refers to Mobile Homeowners Insurance
Agencies, Inc., a managing general agency; (vi) "Premium Finance" refers to
Liberty American Premium Finance Company; and (vii) "PCHC Investment" refers to
PCHC Investment Corp., an investment holding company. Philadelphia Insurance was
incorporated in Pennsylvania in 1984, as an insurance holding company. Liberty
American Insurance Group, Inc. (formerly The Jerger Company, Inc.), a Delaware
insurance holding company, and its subsidiaries of MUSA, LAIC, MHIA and Premium
Finance, are sometimes referred to herein collectively as "Liberty".

     During 2001, the Company continued its growth through adherence to its core
philosophies of specialization, mixed marketing and profitable underwriting.
2001 gross written premiums increased 30.9% to $473.6 million. The GAAP basis
combined ratio (the sum of the net loss and loss adjustment expenses and
acquisition costs and other underwriting expenses divided by net earned
premiums) was 93.4%, which was substantially lower than the property and
casualty industry as a whole. Total assets increased to $1,017.7 million, and
shareholders' equity increased to $428.7 million.

     Premium growth was also attributable to marketplace disruptions which
resulted in improving premium rates and policy terms during the second half of
2000 and through the first nine months of 2001. Additionally, the terrorist
attacks of September 11, 2001 caused the property and casualty industry to
experience significant losses. As a result, the Company anticipates that the
rate increases and improving policy terms, which started to occur in the second
half of 2000, will now continue, possibly for an extended period of time. To
better position itself to take advantage of these improving conditions the
Company issued 3.6 million shares of its common stock through a public offering
in the fourth quarter of 2001. The $114.5 million in net proceeds from this
offering are primarily being utilized to provide additional capital for the
Company's Insurance Subsidiaries and to fund general corporate purposes.

     In February 2001, A.M. Best Company reaffirmed the "A+" (superior) rating
for the Insurance Subsidiaries.


INDUSTRY TRENDS

     During the 1990s and into 2000, the insurance industry maintained excess
capacity, creating highly competitive market conditions, as evidenced by
declining premium rates and, in many cases, policy terms less favorable to the
insurer. As a result, the industry suffered from reduced profitability and a
contraction of capacity as insurers chose or were forced to exit the
marketplace. During the second half of 2000 and through the first nine months of
2001, reduced insurance and reinsurance supply and increased demand caused
premium rates and policy terms to show signs of significant improvement.

     The terrorist attacks of September 11, 2001 caused the property and
casualty industry to experience significant losses. As a result, industry
participants expect that the rate increases and improving terms occurring before
September 11th will continue through the remainder of 2001 and possibly for an
extended period of time. Increased reinsurance costs may, to some extent, offset
the benefits of these trends to insurance companies.

     The Company believes that it is favorably positioned to take advantage of
these improving conditions. The rate increase currently being experienced on
renewal business is in the 5% to 30% range. There can be no assurance, however,
that these favorable trends will continue or that these rate increases can be
sustained.


BUSINESS OVERVIEW AND STRATEGY

     The Company designs, markets and underwrites specialty commercial and
personal property and casualty insurance products incorporating value-added
coverages and services for select target markets or niches. Insurance products
are distributed through a diverse multichannel delivery system centered around
the Company's direct production underwriting organization. A select group of 59
"preferred agents" and a broader network of approximately 6,000 independent
agents

                                       2
<PAGE>
supplement the production underwriting organization, which consisted of
148 professionals located in 36 regional and field offices across the United
States as of December 31, 2001.

     The Company's commercial products include commercial multi-peril package
insurance targeting specialized niches, including non-profit organizations,
health and fitness organizations, homeowners' associations, condominium
associations, specialty schools and day care facilities; commercial automobile
insurance targeting the leasing and rent-a-car industries; property insurance
for large commercial accounts such as shopping centers, business parks and
medical facilities; and inland marine products targeting larger risks such as
new builders' risk and miscellaneous property floaters.

     The Company also writes select classes of professional liability and
directors' and officers' liability products, as well as personal property and
casualty products for the manufactured housing and homeowners' markets.

     The Company maintains detailed systems, records and databases that enable
the continuous monitoring of its book of business in order to identify and react
swiftly to positive or negative development trends. The Company is able to track
performance, including loss ratios, by segment, product, region, state, producer
and policyholder. Detailed profitability reports are produced and reviewed on a
routine, primarily monthly, basis as part of the policy of continuously
analyzing and reviewing the book of business.

     The Company maintains a local presence to more effectively serve its
producer and customer base, operating through 9 regional offices and 27 field
offices throughout the country, which report to the regional offices. These
offices are staffed with field underwriters, marketers and, in some cases, claim
personnel, which interact closely with home office management in making key
decisions. This approach allows the Company to adapt its underwriting and
marketing strategies to local conditions and build close relationships with its
customers and producers at the local level.

     The Company selects and targets industries and niches that present
specialized areas of demand where it believes it can grow business through
creatively developing insurance products with innovative features specially
designed to meet those areas of demand. The Company believes that these features
are not included in typical property and casualty policies, enabling it to
compete based on the unique or customized nature of the coverage provided as
opposed to price.


Business Segments

     The Company's operations are classified into three reportable business
segments:

     -    Commercial Lines Underwriting Group, which has underwriting
          responsibility for the commercial multi-peril package, commercial
          automobile and specialty property and inland marine insurance
          products;

     -    Specialty Lines Underwriting Group, which has underwriting
          responsibility for the professional liability and directors' and
          officers' liability insurance products; and

     -    Personal Lines Underwriting Group, which has underwriting
          responsibility for personal property and casualty insurance products
          for the manufactured housing and homeowners' markets.

     The following table sets forth, for the years ended December 31, 2001, 2000
and 1999, the gross written premiums for each of the Company's business segments
and the relative percentages that such premiums represented.

<TABLE>
<CAPTION>
                                                    For the Years Ended December 31,
                        -----------------------------------------------------------------------------------------
                                  2001                           2000                             1999
                        ------------------------        -------------------------       -------------------------
                        Dollars       Percentage        Dollars        Percentage        Dollars       Percentage
                        --------      ----------        --------       ----------       --------       ----------
                                                       (dollars in thousands)
<S>                     <C>           <C>               <C>            <C>              <C>            <C>
Commercial Lines        $315,948          66.7%         $239,446          66.2%         $200,972          73.1%
Specialty Lines           79,317          16.7            68,193          18.8            48,532          17.7
Personal Lines            78,300          16.6            54,233          15.0            25,414           9.2
                        --------         -----          --------         -----          --------         -----
Total                   $473,565         100.0%         $361,872         100.0%         $274,918         100.0%
                        ========         =====          ========         =====          ========         =====
</TABLE>

                                       3
<PAGE>
Commercial Lines:

     Commercial Package: The Company has provided commercial multi-peril package
policies to targeted niche markets for over 15 years. The customers for these
policies include:

     -    non-profit and social service organizations;

     -    health and fitness organizations;

     -    homeowners' associations;

     -    condominium associations;

     -    specialty schools;

     -    boat dealerships;

     -    mobile home parks; and

     -    day care facilities.

     The package policies provide a combination of comprehensive liability,
property and automobile coverage with limits up to $1.0 million for casualty,
$50.0 million for property, and umbrella limits on an optional basis up to $10.0
million. The Company believes its ability to provide professional liability,
general liability and directors' and officers' coverages in one policy is
advantageous and convenient to producers and policyholders.

     Commercial Automobile and Commercial Excess: The Company has provided
commercial automobile products to the leasing and rent-a-car industries for over
35 years. Coverages offered to the rent-a-car industry include:

     -    the business owner's property; and

     -    dual interest liability and physical damage on the rental vehicle.

     The Company also offers additional coverage at the rental car counter to
rent-a-car customers through arrangements with a number of the largest
rent-a-car companies. The insurance protects against liability for bodily injury
and property damage in excess of the statutory coverage provided with the rental
vehicle and primary coverage over the customer's personal automobile insurance
coverage. A proprietary sales training program has been developed to help the
car rental companies offer this coverage to the public. This coverage also pays
claims up to the coverage limit and is primary over the renter's personal
automobile insurance coverages.

     The Company also offers a wide range of liability and physical damage
coverages to companies that lease automobiles on an extended term basis and to
their customers. For the renter, coverages include both primary liability and
physical damage coverage on the vehicle. For the leasing company, coverages
include contingent and excess liability over the primary liability layer, which
protects the leasing company in the event of a loss when the primary coverage is
absent or inadequate. The following products are also offered to leasing
companies:

     -    interim primary liability and physical damage coverage, which protects
          the leasing company before and after the vehicle is delivered to the
          renter;

     -    residual value coverage which guarantees the value of the leased
          vehicle at the termination of the lease; and

     -    guaranteed asset protection coverage, which protects the leasing
          company and renter for the difference between the leased vehicle's
          actual cash value and the lease or loan net value in instances where
          the vehicle is stolen or damaged beyond repair.

     Specialty Property & Inland Marine: In September 1998, the Company
introduced a new line of business utilizing experienced specialty property and
inland marine underwriters. These underwriters specialize in:

     -    insuring large property risks for specific classes of customers,
          including shopping centers, business parks and medical facilities; and

     -    underwriting and providing marketing for various classes of inland
          marine insurance, concentrating on the larger segments of inland
          marine, including new builders' risk and miscellaneous property
          floaters.

                                       4
<PAGE>
Specialty Lines:

     The Company has been providing specialty professional liability products
for approximately 14 years, specializing in proprietary policies developed
primarily for the professional liability, employment practices and directors'
and officers' liability markets. The professional liability products provide
errors and omissions coverage for lawyers, accountants and other professions.
The directors' and officers' product is offered to non-profit, for-profit and
financial institutions, with an emphasis on non-profit institutions and private
companies.


Personal Lines:

     The Company entered the personal lines property and casualty business
through the acquisition of Liberty American Insurance Group, Inc. in 1999.
Through Liberty as the personal lines platform, specialized manufactured housing
and homeowners' property and casualty business is produced and underwritten,
principally in Florida, and to a lesser extent, in California, Arizona and
Nevada. The Company also writes and services federal flood insurance under the
National Flood Insurance Program for both personal and commercial policyholders.

     Products offered include manufactured housing insurance for senior citizen
retirees in "preferred" parks, a program for newly constructed manufactured
homes on private property; and a preferred homeowners' program that targets
newer homes valued between $100,000 and $250,000 in gated retiree communities.
In coastal counties in Florida a homeowners' program is also offered that
excludes wind exposure. The Florida Windstorm Underwriting Association insures
the wind exposure on these risks.

     The following table provides the geographic distribution of the Company's
risks insured as represented by direct earned premiums for all reportable
business segments for the year ended December 31, 2001. No other state accounted
for more than 2% of total direct earned premiums for all product lines for the
year ended December 31, 2001 (dollars in thousands).

<TABLE>
<CAPTION>
State                                       Direct Earned Premiums     Percent of Total
-----                                       ----------------------     ----------------
<S>                                         <C>                        <C>
Florida                                            $108,175                  26.4%
California                                           47,364                  11.6
New York                                             24,976                   6.1
Ohio                                                 20,929                   5.1
Texas                                                17,617                   4.3
Pennsylvania                                         14,716                   3.6
New Jersey                                           14,498                   3.5
Illinois                                             13,845                   3.4
Massachusetts                                        12,381                   3.0
Other                                               135,313                  33.0
                                                   --------                 -----
Total Direct Earned Premiums                       $409,814                 100.0%
                                                   ========                 =====
</TABLE>


Underwriting and Pricing

     The Company's business segments are organized around its three underwriting
divisions: Commercial Lines, Specialty Lines, and Personal Lines. Each
underwriting division's responsibilities include: pricing, managing the risk
selection process, and monitoring loss ratios by product and insured.

     The Company attempts to adhere to conservative underwriting and pricing
practices. The Company's underwriting strategy is detailed in a document, which
is signed by each underwriting professional. Written underwriting guidelines are
maintained, and updated regularly, for all classes of business underwritten.
Adherence to underwriting guidelines is maintained through underwriting audits
conducted by the Company. Product price levels are measured utilizing a price
monitoring system which measures the aggregate price level of the book of
business. This system is intended to assist management and underwriters in
promptly recognizing and correcting price deterioration. When necessary, the
Company is willing to re-underwrite, sharply curtail or discontinue a product
deemed to present unacceptable risks.

     The Commercial Lines Underwriting Group has underwriting responsibility for
the Company's commercial multi-peril package, commercial automobile and large
property and inland marine products. The Commercial Lines Underwriting Group
currently consists of 30 home office underwriters that are supported by
underwriting assistants, raters, and other policy administration personnel. The
Commercial Lines home office underwriters and support staff are organized into
an underwriting unit responsible for underwriting and servicing renewal business
and supporting the field underwriters. The

                                       5
<PAGE>
underwriting unit is under the direction of Underwriter Managers who report to
the Vice President of Commercial Lines Underwriting.

     The Company has also placed underwriters in each of the Company's regional
marketing offices plus two of its field offices. These 16 underwriters have
responsibility for pricing and underwriting new business within the Company's
guidelines and policy issuance. Overall management of the book of business
resides in the home office with the senior underwriting officers. The Company
believes that its ability to deliver excellent service and build long lasting
relationships is enhanced through maintaining a localized presence.

     The Specialty Lines Underwriting Group consists of 15 home office
underwriters and underwriter trainees and 14 regional underwriters. These
underwriters and underwriter trainees are supported by underwriting assistants,
raters, and other policy administration personnel. The Specialty Lines
underwriters have responsibility for underwriting specific professional
liability products within designated Company marketing regions. These regional
underwriters work closely with the marketing department.

     The Personal Lines Underwriting Group is located in Pinellas Park, Florida.
The underwriting staff consists of 14 professionals who are under the direction
of the Personal Lines Underwriting Vice President. Much of the underwriting
function is automated by rating software and internet access. The underwriting
guidelines are embedded within the program and will not allow binding of
accounts if a risk does not meet the presented underwriting guidelines. The
Company has a proactive exposure distribution management system in place to
assure portfolio optimization. This is managed on a zip code level basis through
in-house software and external modeling tools. The Company inspects all risks on
its new preferred homeowners program and manufactured homes on private property.

     The Company uses a combination of Insurance Services Office, Inc. ("ISO")
coverage forms and rates and independently filed forms and rates. Coverage forms
and rates are independently developed in situations where the line of business
is not supported by ISO or where management believes the ISO forms and rates do
not adequately address the risk. Departures from ISO forms are also used to
differentiate the Company's products from its competitors' products and are
independently filed.


Reinsurance

     The Company has entered into various reinsurance agreements for the purpose
of limiting loss exposure and diversifying business. The Company's casualty
excess of loss reinsurance agreement provides that the Company bears the first
layer of liability on each occurrence (varying from $0.5 million to $1.0 million
based upon the specific product) with its reinsurer bearing the remaining
contractual liability, if any, up to $1.0 million. Casualty risks in excess of
$1.0 million up to $11.0 million are reinsured under a casualty treaty ("Excess
Treaty") placed through a reinsurance broker with several reinsurers.
Facultative reinsurance (reinsurance which is provided on an individual risk
basis) is placed for each casualty risk in excess of $11.0 million.

     The Company's property excess of loss reinsurance treaty provides that the
Company bears the first $0.5 million layer of loss on each risk with the
reinsurers bearing the next layer of loss up to $10.0 million on each risk. The
Company has an automatic facultative excess of loss cover for each property risk
in excess of $10.0 million up to $50.0 million. To mitigate potential exposures
to losses arising from terrorist acts, the Company has purchased reinsurance
coverage for terrorism with a $10.0 million aggregate policy limit for 2002.
Additionally, the Company has property catastrophe reinsurance for its
commercial and personal property books of business under which the Company bears
the first $5.0 million in catastrophe losses per event, with the reinsurers
bearing the next $242.4 million, except that, outside of Florida, the Company
bears the first $5.0 million in catastrophe losses per event, with reinsurers
bearing the next $5.0 million on its commercial property book of business. Based
upon the various modeling methods utilized by the Company to estimate its
probable maximum loss, the Company currently maintains catastrophe reinsurance
coverage for the 250 year storm event on personal lines business and the 100
year storm event on its commercial lines business.

     The Company also has an excess casualty reinsurance agreement which
provides an additional $5.0 million of coverage for protection from exposures
such as extra-contractual obligations and judgments in excess of policy limits.
Additionally, an errors and omissions insurance policy provides an additional
$10.0 million of coverage with respect to these exposures.

     Effective January 1, 2001, the Company entered into a three-year aggregate
stop loss reinsurance agreement commencing with the 2001 accident year. The
agreement includes all the business written by the Company. Under the terms

                                       6
<PAGE>
of the agreement, the reinsurer provides reinsurance protection for a certain
aggregate dollar limit for losses and loss adjustment expenses in excess of a
predetermined loss ratio (the sum of losses and loss adjustment expenses divided
by earned premiums).

     The Company seeks to limit the risk of a reinsurer's default in a number of
ways. First, the Company principally contracts with large reinsurers that are
rated at least "A-" (Excellent) by A.M. Best. Second, the Company seeks to
collect the obligations of its reinsurers on a timely basis. This collection
effort is supported through the regular monitoring of reinsurance receivables.
Finally, the Company typically does not write casualty policies in excess of
$11.0 million or property policies in excess of $25.0 million. Although
reinsurance makes the reinsurer liable, to the extent the risk is transferred,
it doesn't relieve the Company of its liability to policyholders.

     The Company regularly assesses its reinsurance needs and seeks to improve
the terms of its reinsurance arrangements as market conditions permit. Such
improvements may involve increases in retentions, modifications in premium
rates, changes in reinsurers and other matters.


Marketing and Distribution

     Proactive risk selection based on sound underwriting criteria and
relationship selling in clearly defined target markets continues to be the
foundation of the Company's marketing plan. Within this framework, the Company's
marketing effort is designed to assure a systematic and disciplined approach to
developing business which is anticipated to be profitable.

     The Company distributes its products through its direct production
underwriting organization, an extensive network of approximately 6,000
independent brokers and its "preferred agent" program. The Company's most
important distribution channel is its production underwriting organization.
Although the Company has always written business directly, the production
underwriting organization was established by the Company to coordinate its
direct sales efforts as well as act as the interface with the Company's external
producers. The production underwriting organization is currently comprised of
148 professionals located in 36 offices in major markets across the country. The
field offices are focused daily on interacting with prospective and existing
insureds. In addition to this direct marketing, relationships with approximately
6,000 brokers have been formed either because the broker has a preexisting
relationship with the insured or has sought the Company's expertise in one of
its specialty products. This mixed marketing concept provides the Company with
the flexibility to respond to changing market conditions and, when appropriate,
shift its emphasis between direct and indirect marketing approaches to seize
opportunities as they arise. In addition, the production underwriting
organization's ability to gather market intelligence enables the rapid
identification of soft markets and redeployment to firmer markets, from a
product line or geographic perspective. The Company believes that its mixed
marketing platform provides a competitive edge in stable market conditions, the
strengths of which are all the more evident during periods of dislocation or
consolidation.

     The Company's preferred agent program, in which business relationships are
formed with brokers specializing in certain of the Company's business niches,
consisted of 59 preferred agents at year-end 2001. Preferred Agents are
identified by the Company based on productivity and loss experience and receive
additional benefits from the Company in exchange for meeting defined production
and profitability criteria.

     The Company supplements its marketing efforts through affinity programs,
trade shows, direct mailings and national advertisements placed in trade
magazines serving industries in which the Company specializes, as well as links
to industry web sites. The Company has also enhanced its marketing with
Internet-based initiatives such as: the Personal Lines Division's "In Touch(SM)"
real-time policy inquiry system which allows agents to view account data,
process non-dollar endorsements and in certain states, and for certain products,
rate a policy over the internet.


Product Development

     The Company continually evaluates new product opportunities, consistent
with its strategic focus on selected market niches. Direct contacts between the
Company's field and home office personnel and its customers have produced a
number of new product ideas. All new product ideas are presented to the Product
Development Committee for consideration. That committee, currently composed of
the Company's Executive Vice President and officers from the underwriting,
claims and compliance departments, meets regularly to review the feasibility of
products from a variety of perspectives, including underwriting risk, marketing
and distribution, reinsurance, long-term viability and consistency with the
Company's culture and philosophy. For each new product, an individualized test
market plan is prepared, addressing such matters as the appropriate distribution
channel (e.g., a limited number of selected production underwriters), an
appropriate cap on premiums to be generated during the test market phase and
reinsurance requirements for the test market phase. Test market products

                                       7
<PAGE>
may involve lower retentions than customarily utilized. After a new product is
approved for test marketing, the Company monitors its success based on specified
criteria (e.g., underwriting results, sales success, product demand and
competitive pressures). If expectations are not realized, the Company either
moves to improve results by initiating adjustments or abandons the product.


Claims Management and Administration

     In accordance with its emphasis on underwriting profitability, the Company
actively manages claims under its policies in an effort to investigate reported
incidents at an early stage, service insureds and minimize fraud. Claim files
are regularly audited by claims supervisors and the Company's reinsurers in an
attempt to ensure that claims are being processed properly and that reserves are
being set at appropriate levels.

     The Company's experienced staff of claims management professionals are
assigned to dedicated claim units within specific niche markets. Each of these
units receive supervisory direction and news, legislative and product
development updates from the unit director. Claims management personnel have an
average of approximately twenty years of experience in the industry. The
dedicated claim units meet regularly to communicate findings of change within
their assigned specialty. Staff within the dedicated claim units have an average
of ten years experience in the industry.

     The Company maintains a Special Investigations Unit to investigate
suspicious claims and to serve as a clearinghouse for information concerning
fraudulent practices primarily within the rental car industry. Working closely
with a variety of industry contacts, including attorneys, investigators and
rental car company fraud units, this unit has uncovered a number of fraudulent
claims.


Loss and Loss Adjustment Expenses

     The Company is liable for losses and loss adjustment expenses under its
insurance policies and reinsurance treaties. While the Company's professional
liability policies are written on claims-made forms and while claims on its
other policies are generally reported promptly after the occurrence of an
insured loss, in many cases several years may elapse between the occurrence of
an insured loss, the reporting of the loss to the Company and the Company's
payment of the loss. The Company reflects its liability for the ultimate payment
of all incurred losses and loss adjustment expenses by establishing loss and
loss adjustment expense reserves, which are balance sheet liabilities
representing estimates of future amounts needed to pay claims and related
expenses with respect to insured events that have occurred.

     When a claim involving a probable loss is reported, the Company establishes
a case reserve for the estimated amount of the Company's ultimate loss and loss
adjustment expense. This estimate reflects an informed judgment, based on the
Company's reserving practices and the experience of the Company's claims staff.
Management also establishes reserves on an aggregate basis to provide for losses
incurred but not reported ("IBNR"), as well as future development on claims
reported to the Company.

     As part of the reserving process, historical data are reviewed and
consideration is given to the anticipated effect of various factors, including
known and anticipated legal developments, changes in societal attitudes,
inflation and economic conditions. Reserve amounts are necessarily based on
management's estimates and judgments; as new data become available and are
reviewed, these estimates and judgments are revised, resulting in increases or
decreases to existing reserves. The Insurance Subsidiaries obtain an annual
statement of opinion from an independent actuary firm for its statutory filings
with regulators.

     The following table sets forth a reconciliation of beginning and ending
reserves for unpaid loss and loss adjustment expenses, net of amounts for
reinsured losses and loss adjustment expenses, for the years indicated. As a
result of changes in estimates of insured events in prior years, the Company
increased losses and loss adjustment expenses incurred by $13.4 million in 2001.
Such development was primarily due to losses emerging at a higher rate on
automobile leases expiring in 2001 on residual value policies underwritten in
prior years than had been originally anticipated when the initial reserves were
estimated.

                                       8
<PAGE>
<TABLE>
<CAPTION>
                                                                               As of and For the Years Ended December 31,
                                                                               ------------------------------------------
                                                                                 2001             2000            1999
                                                                               --------         --------        ---------
                                                                                          (Dollars in Thousands)
<S>                                                                            <C>              <C>             <C>
Unpaid loss and loss adjustment expenses at
 beginning of year (1)                                                         $195,464         $161,353        $137,205
                                                                               --------         --------        --------
Provision for losses and loss adjustment expenses for
 current year claims                                                            166,220          128,761          99,663
Increase (Decrease) in estimated ultimate losses and loss adjustment
 expenses for prior year claims                                                  13,435            2,543            (253)
                                                                               --------         --------        --------
Total incurred losses and loss adjustment expenses                              179,655          131,304          99,410
                                                                               --------         --------        --------
Loss and loss adjustment expense payments for claims
 attributable to:
  Current year                                                                   54,228           36,271          31,493
  Prior years                                                                    70,757           60,922          43,769
                                                                               --------         --------        --------
Total payments                                                                  124,985           97,193          75,262
                                                                               --------         --------        --------
Unpaid loss and loss adjustment expenses at end of year (2)                    $250,134         $195,464        $161,353
                                                                               ========         ========        ========
</TABLE>

(1)  1999 balance adjusted to include $2,175 net unpaid loss and loss
     adjustment expenses for MUSA as of acquisition date.

(2)  Unpaid loss and loss adjustment expenses differ from the amounts
     reported in the Consolidated Financial Statements because of the
     inclusion therein of reinsurance receivables of $52,599, $42,030 and
     $26,710 at December 31, 2001, 2000 and 1999, respectively.

     The following table presents the development of unpaid loss and loss
adjustment expenses, net of amounts for reinsured losses and loss adjustment
expenses, from 1991 through 2001. The top line of the table shows the estimated
reserve for unpaid loss and loss adjustment expenses at the balance sheet date
for each of the indicated years. These figures represent the estimated amount of
unpaid loss and loss adjustment expenses for claims arising in the current year
and all prior years that were unpaid at the balance sheet date, including IBNR
losses. The table also shows the re-estimated amount of the previously recorded
unpaid loss and loss adjustment expenses based on experience as of the end of
each succeeding year. The estimate changes as more information becomes known
about the frequency and severity of claims for individual years.

                                       9
<PAGE>
<TABLE>
<CAPTION>
                                            AS OF AND FOR THE YEARS ENDED DECEMBER 31,
                                                       (Dollars in Thousands)
                                    ---------------------------------------------------------
                                      1991      1992      1993      1994      1995      1996
                                    -------   -------   -------   -------   -------   -------
<S>                                 <C>       <C>       <C>       <C>       <C>       <C>
UNPAID LOSS AND LOSS
 ADJUSTMENT EXPENSES, AS
 STATED                             $22,248   $31,981   $38,714   $53,595   $68,246   $85,723

Cumulative Paid as of:

1 year later                          6,698     9,865    10,792    12,391    15,214    22,292
2 years later                        12,485    16,290    19,297    23,139    31,410    38,848
3 years later                        16,288    21,253    24,991    33,511    40,637    52,108
4 years later                        17,780    24,299    28,903    38,461    47,994    63,738
5 years later                        19,406    25,793    30,558    42,366    51,806    69,116
6 years later                        19,898    26,321    32,748    43,860    53,198
7 years later                        20,246    27,252    32,929    44,243
8 years later                        20,625    27,336    33,102
9 years later                        20,611    27,288
10 years later                       20,599

Unpaid Loss and Loss Adjustment
 Expenses re-estimated as of End of Year:

1 year later                         22,056    30,538    38,603    52,670    67,281    84,007
2 years later                        21,327    30,428    38,016    52,062    66,061    81,503
3 years later                        21,198    29,648    37,184    51,149    63,872    76,348
4 years later                        21,118    29,306    36,272    49,805    59,085    73,992
5 years later                        21,399    28,553    35,783    47,366    56,673    75,672
6 years later                        21,106    28,370    34,509    45,797    55,861
7 years later                        21,013    27,959    33,799    45,245
8 years later                        20,854    27,724    33,695
9 years later                        20,703    27,623
10 years later                       20,668

Cumulative Redundancy (Deficiency)
  Dollars                           $ 1,580   $ 4,358   $ 5,019   $ 8,350   $12,385   $10,051
  Percentage                            7.1%     13.6%     13.0%     15.6%     18.1%     11.7%
<CAPTION>
                                            AS OF AND FOR THE YEARS ENDED DECEMBER 31,
                                                       (Dollars in Thousands)
                                    ------------------------------------------------------------
                                      1997         1998         1999         2000         2001
                                    --------     --------     --------     --------     --------
<S>                                 <C>          <C>          <C>          <C>          <C>
UNPAID LOSS AND LOSS
 ADJUSTMENT EXPENSES, AS
 STATED                             $108,928     $136,237     $161,353     $195,464     $250,134

Cumulative Paid as of:

1 year later                          26,870       43,769       60,922       70,757
2 years later                         56,488       84,048      109,092
3 years later                         80,206      115,900
4 years later                         95,047
5 years later
6 years later
7 years later
8 years later
9 years later
10 years later

Unpaid Loss and Loss Adjustment
 Expenses re-estimated as of End of Year:

1 year later                         105,759      135,984      163,896      208,899
2 years later                        103,513      138,245      177,782
3 years later                        104,712      146,679
4 years later                        109,061
5 years later
6 years later
7 years later
8 years later
9 years later
10 years later

Cumulative Redundancy (Deficiency)
  Dollars                           $   (133)    $(10,442)    $(16,429)    $(13,435)
  Percentage                            (0.1)%       (7.7)%      (10.2)%       (6.9)%
</TABLE>

(1)  Unpaid loss and loss adjustment expenses differ from the amounts reported
     in the Consolidated Financial Statements because of the inclusion therein
     of reinsurance receivables of $52,599, $42,030, $26,710, $16,120, $13,502,
     $10,919, $9,440, $5,580, $5,539, $1,770, and $1,267 at December 31, 2001,
     2000, 1999, 1998, 1997, 1996, 1995, 1994, 1993, 1992, and 1991,
     respectively.

(2)  1998 Unpaid Loss and Loss Adjustment Expenses, as stated, adjusted to
     include $1,207 unpaid loss and loss adjustment expenses for Mobile USA
     Insurance Company as of acquisition date.

(3)  The Company maintains its historical loss records net of reinsurance and
     therefore is unable to conform the presentation of this table to the
     financial statements.

                                       10
<PAGE>
     The cumulative redundancy (deficiency) represents the aggregate change in
the reserve estimated over all prior years, and does not present accident year
loss development. Therefore, each amount in the table includes the effects of
changes in reserves for all prior years.

     The unpaid loss and loss adjustment expense of the Insurance Subsidiaries,
as reported in their Annual Statements prepared in accordance with statutory
accounting practices and filed with state insurance departments, differ from
those reflected in the Company's financial statements prepared in accordance
with generally accepted accounting principles ("GAAP") with respect to recording
the effects of reinsurance. Unpaid loss and loss adjustment expenses under
statutory accounting practices are reported net of the effects of reinsurance
whereas under GAAP these amounts are reported without giving effect to
reinsurance. Under GAAP, reinsurance receivables, with a corresponding increase
in unpaid loss and loss adjustment expense, have been recorded. (See footnote
(2) on Page 9 for amounts). There is no effect on net income or shareholders'
equity due to the difference in reporting the effects of reinsurance between
statutory accounting practices and GAAP as discussed above.


Operating Ratios

Statutory Combined Ratio

     The statutory combined ratio, which is the sum of (a) the ratio of loss and
loss adjustment expenses incurred to net earned premiums (loss ratio) and (b)
the ratio of policy acquisition costs and other underwriting expenses to net
written premiums (expense ratio), is the traditional measure of underwriting
experience for insurance companies. Generally, if the combined ratio is below
100%, an insurance company has an underwriting profit, and if it is above 100%,
the insurer has an underwriting loss.

     The following table reflects the consolidated loss, expense and combined
ratios of the Insurance Subsidiaries together with the property and casualty
industry-wide combined ratios after policyholders' dividends.

<TABLE>
<CAPTION>
                                                                       For the Years Ended December 31,
                                                        -----------------------------------------------------------------
                                                         2001           2000           1999           1998           1997
                                                        -----          -----          -----          -----          -----
<S>                                                     <C>            <C>            <C>            <C>            <C>
Loss Ratio                                               60.7%          57.8%          59.7%          54.1%          55.3%
Expense Ratio                                            31.2%          31.3%          33.6%          31.0%          29.1%
                                                        -----          -----          -----          -----          -----
Combined Ratio                                           91.9%          89.1%          93.3%          85.1%          84.4%
                                                        =====          =====          =====          =====          =====
Industry Statutory Combined Ratio after
 Policyholders Dividends                                117.0%         110.1%         107.8%         105.6%         101.6%
                                                        =====          =====          =====          =====          =====
                                                         (1)            (2)            (2)            (2)            (2)
</TABLE>

(1)  Source: Best's Review/Preview PC January 2002 (Estimated 2001).

(2)  Source: Best's Review/Preview PC January 2002


Premium-to-Surplus Ratio:

     While there are no statutory provisions governing premium-to-surplus
ratios, regulatory authorities regard this ratio as an important indicator as to
an insurer's ability to withstand abnormal loss experience. Guidelines
established by the National Association of Insurance Commissioners (the "NAIC")
provide that an insurer's net premium-to-surplus ratio is satisfactory if it is
below 3 to 1.

     The following table sets forth, for the periods indicated, net written
premiums to surplus as regards policyholders' for the Insurance Subsidiaries
(statutory basis):

<TABLE>
<CAPTION>
                                                            As of and For the Years Ended December 31,
                                            --------------------------------------------------------------------------
                                               2001            2000            1999            1998            1997
                                            ----------      ----------      ----------      ----------      ----------
                                                                            (Dollars in Thousands)
<S>                                         <C>             <C>             <C>             <C>             <C>
Net Written Premiums (1)                      $333,817        $263,637        $195,258        $143,036        $110,790
Surplus as regards Policyholders              $280,960        $193,292        $179,341        $152,336        $105,985
Premium to Surplus Ratio (1)                1.2 to 1.0      1.4 to 1.0      1.1 to 1.0      1.0 to 1.0      1.0 to 1.0
</TABLE>

(1)  1999 includes $11,187 net written premiums for MUSA from January 1, 1999 to
     date of acquisition.

                                       11
<PAGE>
Investments

     The Company's investment objective is the realization of relatively high
levels of investment income while generating competitive after-tax total rates
of return within a prudent level of risk and within the constraints of
maintaining adequate securities in amount and duration to meet cash requirements
of current operations and long-term liabilities, as well as maintaining and
improving the Company's A.M. Best and Standard & Poor's ratings. The Company
utilizes professional investment managers for its fixed maturity and equity
investments, which consist of diversified issuers and issues.

     At December 31, 2001, the Company had total investments with a carrying
value of $673.4 million, and 93.9% of the Company's total investments were 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, with an average rating of "AA". The collateralized
mortgage securities and asset backed securities consist of shorter tranche
securities possessing favorable pre-payment risk profiles. The remaining 6.1% of
the Company's total investments consisted primarily of publicly-traded common
stocks.

     The following table sets forth information concerning the composition of
the Company's total investments at December 31, 2001:

<TABLE>
<CAPTION>
                                                                     Estimated                           Percent of
                                                                      Market             Carrying         Carrying
                                              Amortized Cost           Value              Value            Value
                                              --------------         ---------          ---------        ----------
                                                                      (Dollars in Thousands)
<S>                                           <C>                    <C>                <C>              <C>
Fixed Maturities:
  Obligations of States and Political
   Subdivisions                                   $104,628           $106,184           $106,184            15.8%
  U.S. Treasury Securities and
   Obligations of U.S. Government
   Corporations and Agencies                        21,024             21,694             21,694             3.2
  Corporate and Bank Debt Securities               157,657            160,326            160,326            23.8
  Collateralized Mortgage Securities                70,362             70,873             70,873            10.5
  Asset Backed Securities                          272,655            273,339            273,339            40.6
Equity Securities                                   34,065             40,992             40,992             6.1
                                                  --------           --------           --------           -----
    Total Investments                             $660,391           $673,408           $673,408           100.0%
                                                  ========           ========           ========           =====
</TABLE>

     At December 31, 2001, approximately 98.7% of the Insurance Subsidiaries'
fixed maturity securities (cost basis) consisted of U.S. government securities
or securities rated "1" or "2" by the NAIC.

     The cost and estimated market value of fixed maturity securities at
December 31, 2001, by remaining original contractual maturity, are set forth
below. Expected maturities may differ from contractual maturities because
certain borrowers have the right to call or prepay obligations, with or without
call or prepayment penalties:

<TABLE>
<CAPTION>
                                                          Amortized Cost      Estimated Market Value
                                                          --------------      ----------------------
                                                                    (Dollars in Thousands)
<S>                                                       <C>                 <C>
Due in one year or less                                     $ 26,096                $ 26,703
Due after one year through five years                        125,719                 127,916
Due after five years through ten years                        48,799                  50,107
Due after ten years                                           82,695                  83,478
Collateralized Mortgage and Asset Backed Securities          343,017                 344,212
                                                            --------                --------
    Total                                                   $626,326                $632,416
                                                            ========                ========
</TABLE>

     Investments of the Insurance Subsidiaries must comply with applicable laws
and regulations which prescribe the type, quality and diversification of
investments. In general, these laws and regulations permit investments, with
specified limits and subject to certain qualifications, in federal, state and
municipal obligations, corporate bonds, preferred and common equity securities,
real estate mortgages and real estate.

                                       12
<PAGE>
Regulation

     General: The Company is subject to extensive supervision and regulation in
the states in which it operates. The supervision and regulation relate to
numerous aspects of the Company's business and financial condition. The primary
purpose of the supervision and regulation is the protection of insurance
policyholders and not the Company's investors. The extent of regulation varies
but generally is governed by state statutes. These statutes delegate regulatory,
supervisory and administrative authority to state insurance departments. This
system of regulation covers, among other things:

     -    standards of solvency, including risk-based capital measurements;

     -    restrictions on the nature, quality and concentration of investments;

     -    restrictions on the types of terms that the Company can include in the
          insurance policies it offers;

     -    certain required methods of accounting;

     -    reserves for unearned premiums, losses and other purposes; and

     -    potential assessments for the provision of funds necessary for the
          settlement of covered claims under certain insurance policies provided
          by impaired, insolvent or failed insurance companies.

     The regulations or the state insurance departments may affect the cost or
demand for the Company's products and may present impediments to obtaining rate
increases or taking other actions to increase profitability. Also, regulatory
authorities have relatively broad discretion to grant, renew or revoke licenses
and approvals. If the Company does not have the requisite licenses and approvals
or does not comply with applicable regulatory requirements, the insurance
regulatory authorities could stop or temporarily suspend the Company from
carrying on some or all of its activities. In light of several recent
significant property and casualty insurance company insolvencies, it is possible
that assessments paid to state guaranty funds may increase. Because the
Insurance Subsidiaries are domiciled in Pennsylvania and Florida, the
Pennsylvania Department of Insurance and the Florida Department of Insurance
have primary authority over the Company.

     Regulation of Insurance Holding Companies: Pennsylvania and Florida, like
many other states, have laws governing insurance holding companies (such as
Philadelphia Insurance). Under these laws, a person generally must obtain the
applicable Insurance Department's approval to acquire, directly or indirectly,
5% to 10% or more of the outstanding voting securities of Philadelphia Insurance
or the Insurance Subsidiaries. Such Department's determination of whether to
approve any such acquisition would be based on a variety of factors, including
an evaluation of the acquiror's financial stability, the competence of its
management, the effect of rates on coverages provided, if any, and whether
competition in Pennsylvania or Florida would be reduced.

     The Pennsylvania and Florida statutes require every Pennsylvania and
Florida-domiciled insurer which is a member of an insurance holding company
system to register with Pennsylvania or Florida, respectively, by filing and
keeping current a registration statement on a form prescribed by the NAIC.

     The Pennsylvania statute also specifies that at least one-third of the
board of directors and each committee thereof, of either the domestic insurer or
its publicly owned holding company (if any), must be comprised of outsiders
(i.e., persons who are neither officers, employees nor controlling shareholders
of the insurer or any affiliate). In addition, the domestic insurer or its
publicly held holding company must establish one or more committees comprised
solely of outside directors, with responsibility for recommending the selection
of independent certified public accountants; reviewing the insurer's financial
condition, the scope and results of the independent audit and any internal
audit; nominating candidates for director; evaluating the performance of
principal officers; and recommending to the board the selection and compensation
of principal officers.

     Under the Florida statute, a majority of the directors must be citizens of
the United States. In addition, no Florida insurer may make any contract whereby
any person is granted or is to enjoy in fact the management of the insurer to
the substantial exclusion of its board of directors or to have the controlling
or preemptive right to produce substantially all insurance business for the
insurer, unless the contract is filed with and approved by the Florida Insurance
Department. An insurer must give the Department written notice of any change of
personnel among the directors or principal officers of the insurer within 45
days of such change. The written notice must include all information necessary
to allow the Department to determine that the insurer will be in compliance with
state statutes.

     Dividend Restrictions: As an insurance holding company, Philadelphia
Insurance will be largely dependent on dividends and other permitted payments
from the Insurance Subsidiaries to pay any cash dividends to its shareholders.
The ability of the Insurance Subsidiaries to pay dividends to the Company is
subject to certain restrictions imposed under Pennsylvania and Florida insurance
laws. Accumulated statutory profits of the Insurance Subsidiaries from which
dividends

                                       13
<PAGE>
may be paid totaled $111.3 million at December 31, 2001. Of this amount, the
Insurance Subsidiaries are entitled to pay a total of approximately $27.4
million of dividends in 2002 without obtaining prior approval from the
Pennsylvania or Florida Insurance Departments. During 2001 the insurance
subsidiaries paid dividends of $13.0 million to PCHC and $3.8 million to Liberty
American Insurance Group, Inc., a subsidiary of PCHC.

     The National Association of Insurance Commissioners: In addition to
state-imposed insurance laws and regulations, the Insurance Subsidiaries are
subject to the general SAP and reporting formats established by the NAIC. The
NAIC also promulgates model insurance laws and regulations relating to the
financial and operational regulation of insurance companies. These model laws
and regulations generally are not directly applicable to an insurance company
unless and until they are adopted by applicable state legislatures or
departments of insurance. However, NAIC model laws and regulations have become
increasingly important in recent years, due primarily to the NAIC's state
regulatory accreditation program. Under this program, states which have adopted
certain required model laws and regulations and meet various staffing and other
requirements are "accredited" by the NAIC. Such accreditation is the cornerstone
of an eventual nationwide regulatory network and there is a certain degree of
political pressure on individual states to become accredited by the NAIC.
Because the adoption of certain model laws and regulations is a prerequisite to
accreditation, the NAIC's initiatives have taken on a greater level of practical
importance in recent years. The NAIC accredited both Pennsylvania and Florida
under the NAIC Financial Regulation Standards.

     All the states have adopted the NAIC's financial reporting form, which is
typically referred to as the NAIC "Annual Statement", and most states, including
Pennsylvania and Florida, generally defer to the NAIC with respect to SAP. In
this regard, the NAIC has a substantial degree of practical influence and is
able to accomplish certain quasi-legislative initiatives through amendments to
the NAIC annual statement and applicable accounting practices and procedures.
For instance, in recent years the NAIC has required all insurance companies to
have an annual statutory financial audit and an annual actuarial certification
as to loss reserves by including such requirements within the annual statement
instructions.

     Capital and Surplus Requirements: PIC's eligibility to write insurance on a
surplus lines basis in most jurisdictions is dependent on its compliance with
certain financial standards, including the maintenance of a requisite level of
capital and surplus and the establishment of certain statutory deposits. In
recent years, many jurisdictions have increased the minimum financial standards
applicable to surplus lines eligibility. For example, California and certain
other states have adopted regulations which require surplus lines companies
operating therein to maintain minimum capital of $15 million, calculated as set
forth in the regulations. PIC maintains capital to meet these requirements.

     Risk-Based Capital: 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 policyholders' surplus of each of the Insurance
Subsidiaries at December 31, 2001 is in excess of the prescribed risk-based
capital requirements.

     Insurance Guaranty Funds: The Insurance Subsidiaries are subject to
guaranty fund laws which can result in assessments, up to prescribed limits, for
losses incurred by policyholders as a result of the impairment or insolvency of
unaffiliated insurance companies. Typically, an insurance company is subject to
the guaranty fund laws of the states in which it conducts insurance business;
however, companies which conduct business on a surplus lines basis in a
particular state are generally exempt from that state's guaranty fund laws.

     Shared Markets: As a condition of its license to do business in various
states, PIIC, MUSA and LAIC are required to participate in mandatory
property-liability shared market mechanisms or pooling arrangements which
provide various insurance coverages to individuals or other entities that
otherwise are unable to purchase coverage voluntarily provided by private
insurers. In addition, some states require automobile insurers to participate in
reinsurance pools for claims that exceed a certain amount. PIIC's participation
in such shared markets or pooling mechanisms is generally in proportion to
the amount of PIIC's direct writings for the type of coverage written by the
specific pooling mechanism in the applicable state.

     Possible New Legislation, Regulations or Interpretations: A number of new,
proposed or potential legislative or industry developments could further
increase competition in the insurance industry. These developments include:

     -    the enactment of the Gramm-Leach-Bliley Act of 1999 (which permits
          financial services companies such as banks and brokerage firms to
          engage in the insurance business), which could result in increased
          competition from new entrants to the Company's markets;

     -    the formation of new insurers and an influx of new capital in the
          marketplace as existing companies attempt to expand their business as
          a result of better pricing and/or terms;

                                       14
<PAGE>
     -    programs in which state-sponsored entities provide property insurance
          in catastrophe-prone areas;

     -    changing practices caused by the Internet, which have led to greater
          competition in the insurance business; and

     -    as a result of the terrorist attacks on September 11, the
          Administration and Congress have been engaged in discussions with
          the insurance industry as to the possible involvement of the federal
          government with respect to terrorism insurance. There can be no
          assurance as to whether there will be any federal government role in
          insuring losses from terrorism or the precise nature of any role, and
          there is no assurance as to the extent of any federal government role
          on the Company's business and results of operations.

     These developments could make the property and casualty insurance
marketplace more competitive by increasing the supply of insurance capacity. In
that event, recent favorable industry trends that have reduced insurance and
reinsurance supply and increased demand could be reversed and may negatively
influence our ability to maintain or increase rates. Accordingly, these
developments could have an adverse effect on the Company's earnings.


Competition

     The Company competes with a large number of other companies in its selected
line of business, including major U.S. and non-U.S. insurers and other regional
companies, as well as mutual companies, specialty insurance companies,
underwriting agencies and diversified financial services companies. Some of
these competitors have greater financial and marketing resources than the
Company. Profitability could be adversely affected if business is lost due to
competitors offering similar or better products at or below the Company's
prices. In addition, a number of new, proposed or potential legislative or
industry developments could further increase competition. New competition from
these developments could cause the demand for the Company's products to fall,
which could adversely affect profitability.

     The current business climate remains competitive from a solicitation
standpoint. The Company will "walk away", if necessary, from writing business
that does not meet established underwriting standards and pricing guidelines.
Management believes though that the Company's mixed marketing strategy is a
strength in that it provides the flexibility to quickly deploy the marketing
efforts of the Company's direct production underwriters from soft market
segments to market segments with emerging opportunities. Additionally, through
the mixed marketing strategy, the Company's production underwriters have
established relationships with approximately 6,000 brokers, thus facilitating a
regular flow of submissions.


Employees

     As of March 19, 2002, the Company had 592 full-time employees and 23
part-time employees. The Company actively encourages its employees to continue
their educational efforts and aids in defraying their educational costs
(including 100% of education costs related to the insurance industry).
Management believes that the Company's relations with its employees are
generally excellent.


Item 2. DESCRIPTION OF PROPERTY

     The Company leases certain office space in Bala Cynwyd, PA which serves as
     its headquarters location, and also leases 36 offices for its field
     marketing organization.

Item 3. LEGAL PROCEEDINGS

     In connection with the action filed in the U.S. District Court in the
     Middle District of Florida by two of the Company's subsidiaries, Liberty
     American Insurance Group Inc. and Mobile Homeowners Insurance Agency Inc.,
     against Westpoint Underwriters LLC, a managing general agent, two former
     employees of Liberty American and a third individual (which action was
     reported in Item 1 of Part II of the Company's Form 10-Q for the period
     ended March 31, 2001), a federal magistrate judge issued a report and
     recommendations to the Federal District Court on October 17, 2001. With
     respect to Liberty American's request for preliminary relief, the findings
     and recommendations stated that one of the former employees had
     misappropriated Liberty American's trade secrets by using its software to
     write WestPoint's software. The magistrate judge recommended against
     injunctive relief, finding that damages may be available as a remedy. Both
     Liberty American and the defendant have objected, in part, to the findings,
     and these objections are now being considered by the court.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth
     quarter of 2001.

                                       15
<PAGE>
                                    PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     (a) The Company's common stock, no par value, trades on The Nasdaq Stock
     Market under the symbol "PHLY". As of February 22, 2002, there were 397
     holders of record and 2,233 beneficial shareholders of the Company's common
     stock. The high and low sales prices of the common stock, as reported by
     the National Association of Securities Dealers, were as follows:

<TABLE>
<CAPTION>
                              2001                    2000
                       ------------------      ------------------
     Quarter            High        Low         High         Low
     -------           ------      ------      ------      ------
     <S>               <C>         <C>         <C>         <C>
     First             31.922      25.375      16.000      14.250
     Second            36.000      24.250      18.090      14.580
     Third             37.500      24.350      20.880      15.690
     Fourth            41.300      32.900      30.880      20.000
</TABLE>

     The Company did not declare cash dividends on its common stock in 2001 and
     2000, and currently intends to retain its earnings to enhance future
     growth. The payment of dividends by the Company will be determined by the
     Board of Directors and will be based on general business conditions and
     legal and regulatory restrictions.

     As a holding company, the Company is dependent upon dividends and other
     permitted payments from its subsidiaries to pay any cash dividends to its
     shareholders. The ability of the Company's insurance subsidiaries to pay
     dividends to the Company is subject to regulatory limitations (see Note 3
     to the Consolidated Financial Statements).

     (b) During the three years ended December 31, 2001, the Company did not
     sell any of its securities which were not registered under the Securities
     Act of 1933, except as follows:

     On July 16, 1999 the Company issued an aggregate of 1,037,772 shares of its
     common stock to the four shareholders of The Jerger Company, Inc. in
     connection with the merger of The Jerger Company, Inc. into a subsidiary of
     the Company. This issuance was exempt from registration under Section 4(2)
     of the Securities Act of 1933 as a result of the limited number of persons
     to whom the shares were issued and the fact that the shares were issued in
     a negotiated merger transaction.

                                       16
<PAGE>
Item 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                       As of and For the Years Ended December 31,
                                                                   (In Thousands, Except Share and Per Share Data)
                                                           2001           2000          1999            1998           1997
                                                       -----------    -----------    -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>            <C>            <C>
Operations and Comprehensive Income
 Statement Data:
Gross Written Premiums                                 $   473,565    $   361,872    $   274,918    $   197,408    $   159,091
Gross Earned Premiums                                  $   421,063    $   328,350    $   245,978    $   174,737    $   150,128
Net Written Premiums                                   $   333,817    $   263,429    $   184,071    $   143,036    $   111,797

Net Earned Premiums                                    $   296,093    $   227,292    $   164,915    $   122,687    $   100,555
Net Investment Income                                       32,426         25,803         20,695         15,448          9,703
Net Realized Investment Gain (Loss)                          3,357         11,718          5,700            474            (16)
Other Income                                                   587          8,981          4,722            219            228
------------------------------------------------------------------------------------------------------------------------------
     Total Revenue                                         332,463        273,794        196,032        138,828        110,470
------------------------------------------------------------------------------------------------------------------------------
Net Loss and Loss Adjustment
 Expenses                                                  179,655        131,304         99,410         66,374         55,009
Acquisition Costs and Other
 Underwriting Expenses                                      97,020         75,054         53,793         38,422         31,344
Other Operating Expenses                                     6,841         14,679          8,939          2,212          1,909
------------------------------------------------------------------------------------------------------------------------------
     Total Losses and Expenses                             283,516        221,037        162,142        107,008         88,262
------------------------------------------------------------------------------------------------------------------------------
Minority Interest:  Distributions on
 Company Obligated Mandatorily
 Redeemable Preferred Securities of
 Subsidiary Trust                                            2,749          7,245          7,245          4,770             --
------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                                  46,198         45,512         26,645         27,050         22,208
Total Income Tax Expense                                    15,639         14,742          7,802          7,022          5,338
------------------------------------------------------------------------------------------------------------------------------
     Net Income                                        $    30,559    $    30,770    $    18,843    $    20,028    $    16,870
------------------------------------------------------------------------------------------------------------------------------
Weighted-Average Common Shares
 Outstanding                                            16,528,601     12,177,989     12,501,165     12,249,262     12,193,659
Weighted-Average Share Equivalents
 Outstanding                                               656,075      2,411,552      2,614,399      2,680,165      2,736,039
------------------------------------------------------------------------------------------------------------------------------
Weighted-Average Shares and Share
 Equivalents Outstanding                                17,184,676     14,589,541     15,115,564     14,929,427     14,929,698
------------------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                               $      1.85    $      2.53    $      1.51    $      1.63    $      1.38
------------------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share                             $      1.78    $      2.11    $      1.25    $      1.34    $      1.13
------------------------------------------------------------------------------------------------------------------------------
Year End Financial Position:
  Total Investments and Cash
   and Cash Equivalents                                $   723,318    $   487,028    $   420,016    $   388,059    $   229,599
  Total Assets                                           1,017,722        730,464        599,051        476,390        292,724
  Unpaid Loss and Loss Adjustment
   Expenses                                                302,733        237,494        188,063        151,150        122,430

  Minority Interest in Consolidated
   Subsidiaries                                                 --         98,905         98,905         98,905             --
  Total Shareholders' Equity                               428,692        182,325        161,440        137,483        111,284
  Common Shares Outstanding                             21,509,723     13,431,408     12,590,908     12,200,563     12,242,431
------------------------------------------------------------------------------------------------------------------------------
Insurance Operating Ratios
 (Statutory Basis):
  Net Loss and Loss Adjustment
   Expenses to Net Earned Premiums                            60.7%          57.8%          59.7%          54.1%          55.3%
  Underwriting Expenses to Net
   Written Premiums                                           31.2%          31.3%          33.6%          31.0%          29.1%
------------------------------------------------------------------------------------------------------------------------------
Combined Ratio                                                91.9%          89.1%          93.3%          85.1%          84.4%
==============================================================================================================================
                                                            A+             A+             A+             A+              A
A.M. Best Rating                                        (Superior)     (Superior)     (Superior)     (Superior)    (Excellent)
</TABLE>

                                       17
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

Operations

During 2001 the Company continued its growth, with gross written premium
increasing 30.9% to $473.6 million. This growth is attributable to a number of
varying factors, the most notable of which were:

-    Continued benefits from marketplace disruptions due to rating agency
     downgrades, insolvencies and merger and acquisition activity. These
     disruptions have resulted in new independent agency relationships, improved
     premium rates and policy terms and increased market share in certain of the
     Company's commercial lines segment niche products;

-    The 44.4% growth in the personal lines segment, primarily attributable to
     the Company's "preferred homeowners" insurance program, which was
     introduced during 2000 to retirees in gated communities; and

-    The 20.0% growth in production from the Company's preferred agent force,
     which is comprised of independent brokers specializing in various of the
     Company's product niches.

The Company also believes its core strategy of adhering to an underwriting
philosophy of sound risk selection and pricing discipline, the mixed marketing
platform for its product distribution and creating value added features not
typically found in property and casualty products have also contributed to
generating premium growth above industry averages, as well as enabling the
Company to produce combined ratios (the sum of net loss and loss adjustment
expenses and acquisition costs and other underwriting expenses, divided by net
earned premiums) well below industry averages. The GAAP combined ratio for the
year ended December 31, 2001 was 93.4%, which, once again, was substantially
lower than the property and casualty industry as a whole.

As noted above, during the second half of 2000 and through the first nine months
of 2001 marketplace disruptions resulted in improving premium rates and policy
terms. Additionally, the terrorist attacks of September 11, 2001 caused the
property and casualty industry to experience significant losses. As a result,
the Company anticipates that the rate increases and improving policy terms,
which started to occur in the second half of 2000, will now continue, possibly
for an extended period of time. To better position itself to take advantage of
these improving conditions the Company issued 3.6 million shares of its common
stock through a public offering in the fourth quarter of 2001. The $114.5
million in net proceeds from this offering are primarily being utilized to
provide additional capital for the Company's insurance subsidiaries and to fund
general corporate purposes.

Furthermore, as a result of the terrorist attacks of September 11, 2001, the
Company has endorsed its commercial insurance polices issued during 2002 with
the Insurance Services Office ("ISO") terrorism exclusion in states where
approved by the respective Insurance Departments. Currently, not all states have
approved this ISO terrorism exclusion, and the Company cannot determine whether
the state insurance departments which have not yet approved this exclusion will
ultimately do so. In its capacity as primary insurer the Company may have a
potential gap in its reinsurance protection and could be exposed to potential
losses as a result of any terrorist acts. To mitigate this potential exposure to
losses arising from terrorist acts, the Company has purchased reinsurance
coverage for terrorism with a $10.0 million aggregate policy limit for 2002.

In February 2001, A.M. Best Company reaffirmed the "A+" (Superior) rating for
Philadelphia Indemnity Insurance Company, Philadelphia Insurance Company, Mobile
USA Insurance Company and Liberty American Insurance Company (collectively the
"Insurance Subsidiaries").

                                       18
<PAGE>
Investments

Investments consist of diversified issuers and issues, and as of December 31,
2001, approximately 88.7% and 4.8% of the total invested assets (total
investments plus cash equivalents) on a cost basis consisted of investments in
fixed maturity and equity securities, respectively, versus 84.2% and 5.2%,
respectively, at December 31, 2000.

During 2001, based upon guidance from the Financial Accounting Standards Board
Emerging Issues Task Force (EITF) regarding Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets ("EITF 99-20"), certain of the Company's structured securities
were subject to re-evaluation as a result of meeting the recognition for
impairment losses in EITF 99-20. This re-evaluation resulted in non-cash
realized investment losses of $5.8 million. The Company expects to receive full
contract value and recover the writedowns. Any such recovery will be recognized
prospectively through net investment income.

Also, during 2001 the relative percentage investment in taxable fixed maturity
securities versus tax-exempt fixed maturity securities continued to increase due
to the Company taking advantage of the more favorable after-tax yields. At the
end of 2001, on a cost basis, investment grade taxable fixed maturity securities
represented 73.9% of the total invested assets, compared to 66.5% as of the end
of 2000.

Collateralized mortgage and asset backed securities, on a cost basis, amounted
to $70.4 million and $272.7 million, respectively, as of December 31, 2001 and
$65.6 and $106.8, respectively, as of December 31 2000. The increased investment
in collateralized mortgage and asset backed securities was due to the relatively
higher after tax rates of return compared to other investment options within the
Company's investment objective. This objective is to generate competitive
after-tax total rates of return within a prudent level of risk and the
constraints of maintaining adequate securities in amount and duration to meet
cash requirements of current operations and long-term liabilities, as well as
maintaining and improving the Company's A.M. Best rating. The collateralized
mortgage and asset backed investments are shorter tranche securities possessing
favorable prepayment risk profiles. The Company utilizes professional investment
managers for its investments.


Market Risk of Financial Instruments

The Company's financial instruments are subject to the market risk of potential
losses from adverse changes in market rates and prices. The primary market risks
to the Company are equity price risk associated with investments in equity
securities and interest rate risk associated with investments in fixed
maturities. The Company has established, among other criteria, duration, asset
quality and asset allocation guidelines for managing its investment portfolio
market risk exposure. The Company's investments are held for purposes other than
trading and consist of diversified issuers and issues.

The table below provides information about the Company's financial instruments
that are sensitive to changes in interest rates. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates. The information is presented in U.S. dollar
equivalents.

                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                   DECEMBER 31, 2001
                                                                EXPECTED MATURITY DATES                                   TOTAL
                                                      (In thousands, except average interest rate)                        FAIR
                                         2002       2003        2004        2005       2006    Thereafter    TOTAL        VALUE
                                        -------    -------    --------    -------    -------   ----------   --------    --------
<S>                                     <C>        <C>        <C>         <C>        <C>       <C>          <C>         <C>
FIXED MATURITIES
AVAILABLE FOR SALE:

Principal Amount                        $73,573    $60,291    $112,656    $76,438    $77,866    $220,418    $621,242    $624,050

Book Value                              $73,629    $60,172    $112,339    $77,283    $78,254    $216,412    $618,089          --

Average Interest Rate                      6.38%      5.15%       5.23%      5.83%      5.43%       5.66%       5.61%       4.88%

PREFERRED:

Principal Amount                        $ 2,395    $ 2,250    $  1,000    $ 2,500         --          --    $  8,145    $  8,366

Book Value                              $ 2,400    $ 2,240    $  1,040    $ 2,557         --          --    $  8,237          --

Average Interest Rate                      5.27%      6.07%       6.84%      6.41%        --          --        6.04%       5.97%

SHORT-TERM DEBT:

Principal Amount                        $45,583         --          --         --         --          --    $ 45,583    $ 45,583

Book Value                              $45,583         --          --         --         --          --    $ 45,583          --

Average Interest Rate                      1.87%        --          --         --         --          --        1.87%       1.87%
</TABLE>


Certain Critical Accounting Estimates and Judgments

-    Investments

     --   Fair values

               The carrying amounts for the Company's investments approximates
               their estimated fair value except for investments in limited
               partnerships which are valued at cost. The Company measures the
               fair value of investments based upon quoted market prices or by
               obtaining quotes from dealers.

     --   Other than temporary impairment excluding interests in securitized
          assets

               The Company performs various analytical procedures with respect
               to its investments, including identifying any security whose fair
               value is below its cost. Upon identification of such securities,
               a detailed review is performed to determine whether a decline in
               fair value below a security's cost basis is other than temporary.
               If the Company determines a decline in value to be other than
               temporary, the cost basis of the security is written down to its
               fair value with the amount of the write down included in earnings
               as a realized loss in the period the impairment arose.

                                       20
<PAGE>
     --   Impairment recognition for investments in securitized assets

               The Company's impairment evaluation and recognition for interests
               in securitized assets is conducted in accordance with the
               guidance provided by EITF 99-20. Under this guidance, impairment
               losses on securities must be recognized if both the fair value of
               the security is less than its book value and the net present
               value of expected future cash flows is less than the net present
               value of expected future cash flows at the most recent (prior)
               estimation date. If these criteria are met an impairment charge,
               the difference between the current book value of the security and
               its fair value, is included in earnings as a realized loss in the
               period the impairment arose.

-    Liability for Unpaid Loss and Loss Adjustment Expenses:

     The liability for unpaid loss and loss adjustment expenses ($302.7 million
     and $237.5 million as of December 31, 2001 and 2000, respectively) reflects
     the Company's best estimate for future amounts needed to pay losses and
     related settlement expenses with respect to insured events. This liability
     includes an amount determined on the basis of claim adjusters' evaluations
     with respect to insured events that have occurred and an amount for losses
     incurred that have not been reported to the Company. In some cases
     significant periods of time, up to several years or more, may elapse
     between the occurrence of an insured loss and the reporting of such to the
     Company. The method for determining the Company's liability for unpaid loss
     and loss adjustment expenses includes but is not limited to reviewing past
     loss experience and considering other factors such as legal, social, and
     economic developments. The methods of making such estimates and
     establishing the resulting liabilities are continually reviewed and updated
     and any adjustments resulting therefrom are made in the accounting period
     in which the adjustment arose.

-    Deferred Acquisition Costs:

     Policy acquisition costs ($41.5 million and $33.3 million as of December
     31, 2001 and 2000, respectively) which include commissions, premium taxes,
     fees, and certain other costs of underwriting policies, are deferred and
     amortized over the same period in which the related premiums are earned.
     Deferred acquisition costs are limited to the estimated amounts recoverable
     after providing for losses and expenses that are expected to be incurred,
     based upon historical and current experience. Anticipated investment income
     is considered in determining whether a premium deficiency exists. The
     methods of making such estimates and establishing the deferred costs are
     continually reviewed by the Company, and any adjustments therefrom are made
     in the accounting period in which the adjustment arose.


RESULTS OF OPERATIONS
(2001 versus 2000)

Premiums: Gross written premiums grew $111.7 million (30.9%) to $473.6 million
in 2001 from $361.9 million in 2000; gross earned premiums grew $92.7 million
(28.2%) to $421.1 million in 2001 from $328.4 million in 2000; net written
premiums increased $70.4 million (26.7%) to $333.8 million in 2001 from $263.4
in 2000; and net earned premiums grew $68.8 million (30.3%) to $296.1 million in
2001 from $227.3 million in 2000.

The respective gross written premium increases for the commercial lines,
specialty lines and personal lines segments for the years ended December 31,
2001 vs. December 31, 2000 amount to $76.5 million (31.9%), $11.1 million
(16.3%) and $24.1 million (44.4%), respectively. The overall growth in gross
written premiums is primarily attributable to the following:

-    Rating downgrades of certain major competitor property and casualty
     insurance companies have led to their diminished presence in the Company's
     commercial and specialty lines business segments and continue to result in
     additional prospects and increased premium writings, most notably for the
     Company's various commercial package and non-profit D&O product lines.

-    The consolidation of certain competitor property and casualty insurance
     companies has led to the displacement of certain of their independent
     agency relationships. This consolidation continues to result in new agency

                                       21
<PAGE>
     relationship opportunities for the Company. These relationships have
     resulted in additional prospects and premium writings for the Company's
     commercial and specialty lines segments.

-    Continued expansion of marketing efforts relating to commercial lines and
     specialty lines products through the Company's field organization and
     preferred agents.

-    Rate increases on renewal business.

Overall premium growth in the specialty lines segment has been offset in part by
the Company's decision not to renew certain policies in the professional
liability product lines due to inadequate pricing levels being experienced as a
result of market conditions and/or loss experience emerging at higher than
expected levels.

The respective net written premium increases for the commercial lines, specialty
lines and personal lines segments for the years ended December 31, 2001 vs.
December 31, 2000 amount to $60.3 million (36.9%), $1.9 million (2.8%) and $8.2
million (25.5%), respectively. The differing percentage increases in net written
premiums versus gross written premiums for the period is primarily due to the
various changes in the Company's reinsurance programs.

Net Investment Income: Net investment income was $32.4 million for the year
ended December 31, 2001 and $25.8 million for the same period of 2000. Total
investments grew to $673.4 million at December 31, 2001 from $437.3 million at
December 31, 2000. The growth in investment income is attributable to investing
net cash flows provided by operating activities and the proceeds of the
Company's equity offering received late in the fourth quarter. In addition, the
Company increased the percentage invested in taxable investments versus tax
exempt investments in order to achieve the incremental after tax net investment
income available from taxable investments. The low level of U.S. Treasury yields
persisted throughout 2001. This capital markets environment had the effect of
both increasing the level of prepayments in certain of the Company's interest
rate sensitive investments and causing the Company to slightly shorten its
duration position in the expectation of higher future fixed income yields. As a
result, the Company's average duration on its fixed income portfolio
approximated 2.7 years at December 31, 2001, compared to 3.5 years at December
31, 2000. As a consequence of the above factors, the Company's tax equivalent
book yield on its fixed income holdings was 6.00% at December 31, 2001, compared
to 7.37% at December 31, 2000.

Net Realized Investment Gain: Net realized investment gains were $3.4 million
for the year ended December 31, 2001 and $11.7 million for the same period in
2000. The Company realized net investment gains of $8.3 million from the sales
of common stock securities and $0.9 million from the sales of fixed maturity
securities during the year ended December 31, 2001. These realized net
investment gains were offset by $5.8 million in non-cash realized investment
losses experienced on certain structured securities as a result of an impairment
evaluation in accordance with the recent EITF 99-20 guidance. The proceeds from
the sales are being reinvested in fixed maturity securities to increase current
investment income and decrease the overall percentage of investments in common
stock securities. The net realized investment gains of $11.7 million for the
year ended December 31, 2000 were due to sales of certain equity investments
which resulted in realized net investment gains amounting to $15.1 million, and
were offset by $3.4 million of realized net investment losses from sales of
certain fixed income securities. The proceeds from these sales were reinvested
principally in fixed maturity securities.

Other Income: Other income approximated $0.6 million for the year ended December
31, 2001 and $9.0 million for the same period of 2000. Other income primarily
consists of commissions earned on brokered personal lines business. Such
commissions earned continued to decrease, as planned, as brokering activities
were lessened in 2001 in favor of writing business directly.

Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment expenses
increased $48.4 million (36.9%) to $179.7 million for the year ended December
31, 2001 from $131.3 million for the same period of 2000 and the loss ratio
increased to 60.7% in 2001 from 57.8% in 2000. The year ended December 31, 2001
included a $4.0 million increase to net loss and loss adjustment expenses
arising from business interruption, business personal property, business
property and workers' compensation exposures relating to the September 11, 2001
terrorist attacks. Excluding this item, net loss and loss adjustment expenses
increased by $44.4 million (33.8%). The increase in net loss and loss adjustment
expenses was due principally to:

-    The 30.3% growth in net earned premiums; and

                                       22
<PAGE>
-    Losses emerging at a higher rate on automobile leases expiring in 2001 on
     residual value policies underwritten in prior years than had been
     originally anticipated when the initial reserves were estimated.

Acquisition Costs and Other Underwriting Expenses: Acquisition costs and other
underwriting expenses increased $21.9 million (29.2%) to $97.0 million for the
year ended December 31, 2001 from $75.1 million for the same period of 2000.
This increase was due primarily to the 30.3% growth in net earned premiums,
offset by relative changes in the Company's product mix and associated
distribution channel expense.

Other Operating Expenses: Other operating expenses decreased $7.9 million to
$6.8 million for the year ended December 31, 2001 from $14.7 million for the
same period of 2000. The decrease in other operating expenses was primarily due
to the decrease in brokering activities resulting in a decrease in the amount of
broker commissions (see "Other Income" above). Goodwill amortization of $1.5
million per year, both for 2001 and 2000 will cease on January 1, 2002 due to
the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets."

Income Tax Expense: The Company's effective tax rate for the years ended
December 31, 2001 and 2000 was 33.9% and 32.4%, respectively. The effective
rates differed from the 35% statutory rate principally due to investments in
tax-exempt securities, offset in part by non-deductible goodwill amortization.
The increase in the effective tax rate is principally due to a greater
investment of cash flows in taxable securities relative to tax-exempt
securities.


RESULTS OF OPERATIONS
(2000 versus 1999)

Premiums: Gross written premiums grew $87.0 million (31.6%) to $361.9 million in
2000 from $274.9 million in 1999; gross earned premiums grew $82.4 million
(33.5%) to $328.4 million in 2000 from $246.0 million in 1999; net written
premiums increased $79.3 million (43.1%) to $263.4 million in 2000 from $184.1
million in 1999; and net earned premiums grew $62.4 million (37.8%) to $227.3
million in 2000 from $164.9 million in 1999.

The respective gross written premium increases for the commercial lines,
specialty lines and personal lines segments for the years ended December 31,
2000 vs. December 31, 1999 amount to $38.5 million (19.2%), $19.7 million
(40.6%) and $28.8 million (113.4%) respectively. The overall growth in gross
written premiums is primarily attributable to the following:

-    The growth of Liberty, resulting in an increase of $28.8 million in gross
     manufactured housing, preferred homeowners and National Flood Insurance
     Program written premiums.

-    Recent rating downgrades of certain major competitor property and casualty
     insurance companies has led to their diminished presence in the Company's
     commercial and specialty lines business segments and continues to result in
     additional prospects and increased premium writings most notably for the
     Company's various commercial package and non-profit D&O product lines.

-    The consolidation of certain competitor property and casualty insurance
     companies has led to the displacement of certain of its independent agency
     relationships which continues to result in new agency relationships for the
     Company which have been bringing additional prospects and premium writings
     for the Company's commercial and specialty lines segments.

-    Continued expansion of marketing efforts relating to commercial lines and
     specialty lines products through the Company's field organization and
     preferred agents.

-    Realized rate increases commencing during the latter part of 2000 on
     certain renewal business.

-    Overall premium growth in the commercial lines segment has been offset in
     part by the Company's decision not to renew certain policies in the
     commercial automobile and specialty property product lines due to
     inadequate pricing levels being experienced as a result of market
     conditions and/or loss experience emerging at higher than expected levels.

                                       23
<PAGE>
The respective net written premium increases for the commercial lines, specialty
lines and personal lines segments for the years ended December 31, 2000 vs.
December 31, 1999 amount to $34.4 million (26.6%), $26.9 million (65.8%) and
$18.1 million (128.6%) respectively. The higher percentage increase in net
written premiums versus gross written premiums for the period is primarily due
to the Company, effective January 2000, increasing its liability retention on
each occurrence from $250,000 to $1.0 million for all specialty lines segment
business, thus reducing its reinsurance cost (ceded written premiums) and
increasing its retained premiums (net written premiums).

Net Investment Income: Net investment income approximated $25.8 million in 2000
and $20.7 million in 1999. Total investments grew to $437.3 million at December
31, 2000 from $393.8 million at December 31, 1999. The growth in investment
income is due primarily to investing net cash flows provided from operating
activities; the net investable assets acquired in the Company's acquisition of
Liberty; the reinvestment of $31.4 million in proceeds from the net decrease in
common stock holdings which were reinvested into fixed maturity securities; and
the increase in the Company's tax equivalent book yield on its fixed income
holdings to 7.37% at December 31, 2000 versus 7.08% at December 31, 1999. The
Company's average duration on its fixed income portfolio approximated 3.5 years
at December 31, 2000 and 4.0 years at December 31, 1999.

Net Realized Investment Gain: Net realized investment gains were $11.7 million
for 2000 and $5.7 million for 1999. The Company realized net investment gains of
$15.1 million from the sales of common stock equity securities offset by $3.4
million of realized net investment losses from sales of certain fixed maturity
securities during the year ended December 2000. The proceeds from these common
stock sales were reinvested in fixed maturity securities to increase current
investment income, lessen the Company's holdings in certain common stock
positions, and decrease the overall percentage of investments in common stock
securities. The proceeds realized from the fixed maturity sales were reinvested
in fixed maturity securities with higher relative book yields than the fixed
income securities sold. The net realized investment gains of $5.7 million for
the year ended December 31, 1999 were due to the sales of certain fixed maturity
and equity investments. A portion of the proceeds from these sales were utilized
for the cash purchase price and repayment of certain obligations of the Liberty
acquisition. The remaining proceeds were repositioned within the fixed maturity
portfolio.

Other Income: Other income approximated $9.0 million for the year ended December
31, 2000 and $4.7 for the same period of 1999. Other income primarily consists
of commissions earned by Liberty on brokered personal lines business, and for
the year ended December 31, 1999 only included such income from the July 1999
acquisition date to December 31, 1999. Prospectively the Company anticipates
commissions earned on brokered personal lines business to significantly decrease
as the Company discontinues brokering activities in favor of writing the
business directly.

Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment expenses
increased $31.9 million (32.1%) to $131.3 million in 2000 from $99.4 million in
1999 and the loss ratio decreased to 57.8% in 2000 from 60.3% in 1999. The year
ended December 31, 1999 included 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 and $6.1 million for
unpaid loss and loss adjustment expenses related to property catastrophe losses.
Excluding these items, net loss and loss adjustment expenses increased by $43.0
million (48.7%) and the loss ratio for the year ending December 31, 1999 was
53.6%. This increase in net loss and loss adjustment expenses was due
principally to the following:

-    37.8% growth in net earned premiums;

-    The increase in the loss ratio due to the relatively higher net earned
     premium growth on products (specialty lines) with higher relative loss
     experience; and

-    Losses emerging during 2000 at a higher rate than had been originally
     anticipated for certain products in the commercial lines segment when the
     initial reserves were estimated.

Acquisition Costs and Other Underwriting Expenses: Acquisition costs and other
underwriting expenses increased $21.3 million (39.6%), to $75.1 million in 2000
from $53.8 million in 1999. This increase was due primarily to the 37.8% growth
in net earned premiums and to relative changes in the Company's product mix and
associated distribution expense.

                                       24
<PAGE>
Other Operating Expenses: Other operating expenses increased $5.8 million to
$14.7 million in 2000 from $8.9 million for 1999. The increase in other
operating expenses was primarily due to the inclusion of the operating expenses
of Liberty's brokered personal lines business ($4.2 million), and goodwill
amortization ($.7 million) arising from the acquisition of Liberty. Such
expenses have been incurred for the entire year ending December 31, 2000, while
the 1999 expenses include the period from the July 1999 acquisition date to
December 31, 1999. Prospectively the Company anticipates operating expenses on
brokered personal lines business to significantly decrease as the Company
discontinues brokering activities in favor of writing the business directly.

Income Tax Expense: The Company's effective tax rates for 2000 and 1999 were
32.4% and 29.3%, respectively. The effective rates differed from the 35%
statutory rate principally due to investments in tax-exempt securities offset in
part by non-deductible goodwill amortization. The increase in the effective tax
rate is principally due to a greater investment of cash flows in taxable
securities relative to tax-exempt securities.


GROWTH OPPORTUNITIES

The Company believes that it can continue its premium growth due to: its
national presence via 36 production underwriting offices located across the
United States from which the production underwriting organization markets the
Company's products and services directly to its customers, as well as
coordinating the efforts of the Company's external producers; the evaluation and
development of new product opportunities and differentiation of policy and
service features; the disruption in the marketplace as a result of consolidation
activity and certain distressed situations along with the improving fundamentals
(premium rates and policy terms) in the property and casualty industry; and
expansion of its personal lines business into new states in addition to seeking
premium growth in its current markets. The Company also anticipates cross
selling opportunities to arise between its personal and commercial lines
business niches as well as cross selling opportunities within its preferred
agency base for its portfolio of commercial niche insurance products.

Overall future premium growth may be offset in part due to the continuing
adverse affects the September 11th terrorist attacks have had on the Company's
rental car customers offering its excess liability (SLI) insurance coverage to
the business and leisure traveler. This product is sold at the rental car
counters through arrangements with a number of the largest rent-a-car companies
and protects rent-a-car customers against liability for bodily injury and
property damage excess of the statutory coverage provided with the rental
vehicle. The SLI product represented approximately 8.0% of the 2001 commercial
lines segment total net written premium.

The Company believes its unique product features and mixed marketing strategy is
a strength, in that it provides the market intelligence and flexibility to
quickly deploy the marketing efforts of the Company's direct production
underwriters from market segments where pricing is soft to market segments with
emerging opportunities.


LIQUIDITY AND CAPITAL RESOURCES

Philadelphia Consolidated Holding Corp. (PCHC) is a holding company whose
principal assets currently consist of 100% of the capital stock of its
subsidiaries. The Company's primary sources of funds are dividends from its
subsidiaries and payments received pursuant to tax allocation agreements with
the insurance subsidiaries. For the year ended December 31, 2001, payments to
PCHC pursuant to such tax allocation agreements totaled $18.6 million. The
payment of dividends to PCHC from the insurance subsidiaries is subject to
certain limitations imposed by the insurance laws of the Commonwealth of
Pennsylvania and State of Florida. Accumulated statutory profits or
policyholders' surplus of the insurance subsidiaries from which dividends may be
paid totaled $111.3 million at December 31, 2001. Of this amount, the insurance
subsidiaries are entitled to pay a total of approximately $27.4 million of
dividends in 2002 without obtaining prior approval from the Insurance
Commissioner of the Commonwealth of Pennsylvania or State of Florida. During
2001 the insurance subsidiaries paid dividends of $13.0 million to PCHC and $3.8
million to Liberty American Insurance Group, Inc., a subsidiary of PCHC.

On May 16, 2001, the Company issued 4.0 million common shares to satisfy the
stock purchase contract obligation from the Company's 1998 FELINE PRIDESSM
offering. The issuance of such shares resulted in a $98.9 million increase in
Shareholders' Equity and a corresponding decrease in the Minority Interest In
Consolidated Subsidiaries balance.

                                       25
<PAGE>
On November 27, 2001 the Company closed on its public offering of an aggregate
of 3.6 million shares of its common stock. Proceeds from the offering were
$114.5 million (after underwriting and associated costs). The Company
contributed $70.0 million of the net proceeds to its subsidiaries in 2001, of
which $60.0 million was contributed to the Insurance Subsidiaries. The remaining
proceeds are presently being held for general corporate purposes.

On September 14, 2001, the Company's Board of Directors authorized the
repurchase of an additional $15.0 million of the Company's common stock. This
authorization is in addition to the previously announced $40.0 million common
stock buyback authorization, bringing the total current remaining authorization
to $30.1 million. Purchases are made from time to time in the open market or
through privately negotiated transactions.

Two of the Company's Insurance Subsidiaries are members of the Federal Home Loan
Bank of Pittsburgh ("FHLB"). A primary advantage of FHLB membership is the
ability of members to access credit products from a reliable capital markets
provider. The availability of any one member's access to credit is based upon
its FHLB eligible collateral. At December 31, 2001 the Insurance Subsidiaries
borrowing capacity was $80.8 million. The Insurance Subsidiaries have utilized a
portion of its borrowing capacity to purchase a diversified portfolio in
investment grade floating rate securities. These purchases were funded by
floating rate FHLB borrowings to achieve a positive spread between the rate of
interest on these securities and borrowing rates. The remaining borrowing
capacity will provide an immediately available line of credit. Borrowings
aggregated $31.3 million at December 31, 2001 and bear interest at adjusted
LIBOR and mature twelve months from inception. The weighted-average interest
rate on borrowings outstanding as of December 31, 2001 was 2.07%.

Under certain reinsurance agreements, the Company is required to maintain
investments in trust accounts to secure its reinsurance obligations (primarily
the payment of losses and loss adjustment expenses on business it does not write
directly). At December 31, 2001, the investment and cash balances in such trust
accounts totaled approximately $11.9 million. In addition, various insurance
departments of states in which the Company operates require the deposit of funds
to protect policyholders within those states. At December 31, 2001, the balance
on deposit for the benefit of such policyholders totaled approximately $13.5
million.

The Company produced net cash from operations of $115.1 million in 2001, $47.0
million in 2000 and $47.4 million in 1999. Operating cash included cash provided
from tax benefits as a result of the exercise of employee stock options
amounting to $25.8 million, $0.1 million and $0.3 million for 2001, 2000 and
1999, respectively. Management believes that the Company has adequate liquidity
to pay all claims and meet all other cash needs.

In the normal course of business, the Company has entered into various
reinsurance contracts with unrelated reinsurers. The Company participates in
such agreements for the purpose of limiting loss exposure and diversifying
business. Reinsurance contracts do not relieve the Company from its obligations
to policyholders. To minimize the potential for a write off of amounts due from
reinsurers, the Company: evaluates the financial condition of its reinsurers;
principally contracts with large reinsurers that are rated at least "A-"
(Excellent) by A.M. Best Company; regularly monitors its reinsurance
receivables; and collects the obligations of its reinsurers on a timely basis.

The insurance subsidiaries, which operate under an intercompany reinsurance
pooling agreement, must have certain levels of surplus to support premium
writings. Guidelines of the National Association of Insurance Commissioners (the
"NAIC") suggest that a property and casualty insurer's ratio of annual statutory
net premium written to policyholders' surplus should not exceed 3-to-1. The
ratio of combined annual statutory net premium written by the insurance
subsidiaries to their combined policyholders' surplus was 1.2-to-1.0 and
1.4-to-1.0 for 2001 and 2000, respectively. Management believes that the
policyholders' surplus, which was $281.0 million at December 31, 2001, will be
sufficient to support current and anticipated premium writings.

Risk-based capital is designed to measure the acceptable amount of capital and
surplus an insurer should have, based on the inherent specific risks of each
insurer. Insurers failing to meet this benchmark level may be subject to
scrutiny by the insurer's domiciliary insurance department and ultimately to
rehabilitation or liquidation. Based on the standards currently contained in the
applicable Pennsylvania and Florida Insurance Company statutes, the Insurance
Subsidiaries' capital and surplus is in excess of the prescribed risk-based
capital requirements.

The Company has certain contractual obligations and commitments which are
summarized below:

                                       26
<PAGE>


<TABLE>
<CAPTION>
                                                                      Payments Due by Period
                                                                          (in thousands)
                                              ---------------------------------------------------------------------
Certain Contractual Obligations                             Less than 1                                     After 5
                                               Total           year          1-3 years     4-5 years         years
                                              -------       -----------      ---------     ---------        -------
<S>                                           <C>           <C>              <C>           <C>              <C>
Loans Payable (1)                             $31,341         $31,341         $   --         $   --         $   --
Operating Leases                               11,061           2,709          3,655          3,126          1,571
Other Commercial Commitments (2)                1,100           1,100             --             --             --
                                              -------         -------         ------         ------         ------
Total                                         $43,502         $35,150         $3,655         $3,126         $1,571
                                              =======         =======         ======         ======         ======
</TABLE>

(1)  Represents 12 month collateralized borrowings from the Federal Home Loan
     Bank of Pittsburgh, the proceeds from which are invested to achieve a
     positive spread between the investment and borrowing interest rates.
(2)  Represents open commitments under certain limited partnership agreements.


INFLATION

Property and casualty insurance premiums are established before the amount of
losses and loss adjusted expenses, or the extent to which inflation may affect
such amounts, is known. The Company attempts to anticipate the potential impact
of inflation in establishing its premiums and reserves. Substantial future
increases in inflation could result in future increases in interest rates,
which, in turn, are likely to result in a decline in the market value of the
Company's investment portfolio and resulting unrealized losses and/or reductions
in shareholders' equity.


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, and similar matters. In
connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company provides the following cautionary
remarks regarding important factors which, among others, could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development, results of the Company's business, and the
other matters referred to above include, but are not limited to: (i) changes in
the business environment in which the Company operates, including inflation and
interest rates; (ii) changes in taxes, governmental laws, and regulations; (iii)
competitive product and pricing activity; (iv) difficulties of managing growth
profitably; (v) catastrophe losses; and (vi) the amount of time and extent of
business interruptions and other losses resulting from any future terrorist
attacks.

                                       27
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The table below provides information about the Company's financial instruments
that are sensitive to changes in interest rates. The Company does not have any
derivative financial instruments. For debt obligations, the table presents
principal cash flows and related weighted average interest rates by expected
maturity dates. The information is presented in U.S. dollar equivalents, which
is the Company's reporting currency.

<TABLE>
<CAPTION>
                                                                   DECEMBER 31, 2001
                                                                 EXPECTED MATURITY DATES                                  TOTAL
                                                     (Dollars in thousands, except average interest rate)                  FAIR
                                          2002       2003       2004       2005       2006     Thereafter    TOTAL        VALUE
                                        -------    -------    --------    -------    -------   ----------   --------    --------
<S>                                     <C>        <C>        <C>         <C>        <C>       <C>          <C>         <C>
FIXED MATURITIES AVAILABLE
FOR SALE:
Principal Amount                        $73,573    $60,291    $112,656    $76,438    $77,866    $220,418    $621,242    $624,050
Book Value                              $73,629    $60,172    $112,339    $77,283    $78,254    $216,412    $618,089
Average Interest Rate                      6.38%      5.15%       5.23%      5.83%      5.43%       5.66%       5.61%       4.88%

PREFERRED:
Principal Amount                        $ 2,395    $ 2,250    $  1,000    $ 2,500                           $  8,145    $  8,366
Book Value                              $ 2,400    $ 2,240    $  1,040    $ 2,557                           $  8,237
Average Interest Rate                      5.27%      6.07%       6.84%      6.41%                              6.04%       5.97%

SHORT-TERM DEBT:
Principal Amount                        $45,583                                                             $ 45,583    $ 45,583
Book Value                              $45,583                                                             $ 45,583
Average Interest Rate                      1.87%                                                                1.87%       1.08%
</TABLE>

                                       28
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            Philadelphia Consolidated Holding Corp. and Subsidiaries
                   Index to Financial Statements and Schedules

<TABLE>
<CAPTION>
Financial Statements                                                                        Page
--------------------                                                                     ----------
<S>                                                                                      <C>
Report of Independent Accountants                                                            30
Consolidated Balance Sheets - As of December 31, 2001 and 2000                               31
Consolidated Statements of Operations and Comprehensive Income
  - For the Years Ended December 31, 2001, 2000 and 1999                                     32
Consolidated Statements of Changes in Shareholders' Equity - For the Years Ended
 December 31, 2001, 2000 and 1999                                                            33
Consolidated Statements of Cash Flows - For the Years Ended December 31,
 2001, 2000 and 1999                                                                         34
Notes to Consolidated Financial Statements                                                 35-50

Financial Statement Schedules:

Schedule

I    Summary of Investments - Other Than Investments in
     Related Parties As of December 31, 2001                                                S-1

II   Condensed Financial Information of Registrant As of
     December 31, 2001 and 2000 and For Each of the Three
     Years in the Period Ended December 31, 2001                                         S-2 -- S-4

III  Supplementary Insurance Information As of and For
     the Years Ended December 31, 2001, 2000 and 1999                                       S-5

IV   Reinsurance For the Years ended December 31, 2001,
     2000 and 1999                                                                          S-6

VI   Supplementary Information Concerning Property-Casualty
     Insurance Operations As of and For the Years Ended
     December 31, 2001, 2000 and 1999                                                       S-7
</TABLE>

                                       29
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Philadelphia Consolidated Holding
Corp.:



In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, changes in
shareholders' equity and cash flows present fairly, in all material respects,
the financial position of Philadelphia Consolidated Holding Corp. and
Subsidiaries (the "Company") at December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.





/s/ PricewaterhouseCoopers LLP
Philadelphia, PA
February 8, 2002

                                       30
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                As of December 31,
                                                                           --------------------------
                                                                              2001              2000
                                                                           ----------        --------
<S>                                                                        <C>               <C>
                       ASSETS
Investments:
  Fixed Maturities Available for Sale at Market
   (Amortized Cost $626,326 and $392,439)                                  $  632,416        $394,733
  Equity Securities at Market (Cost $34,065 and $24,087)                       40,992          42,553
                                                                           ----------        --------
     Total Investments                                                        673,408         437,286

  Cash and Cash Equivalents                                                    49,910          49,742
  Accrued Investment Income                                                     6,582           5,726
  Premiums Receivable                                                          96,025          69,377
  Prepaid Reinsurance Premiums and Reinsurance Receivables                     99,601          73,513
  Income Taxes Recoverable                                                         --          13,323
  Deferred Income Taxes                                                         6,196             909
  Deferred Acquisition Costs                                                   41,526          33,324
  Property and Equipment, Net                                                  10,082          10,476
  Goodwill less Accumulated Amortization of $5,604 and $4,112                  25,724          30,809
  Other Assets                                                                  8,668           5,979
                                                                           ----------        --------
     Total Assets                                                          $1,017,722        $730,464
                                                                           ==========        ========


         LIABILITIES and SHAREHOLDERS' EQUITY
Policy Liabilities and Accruals:
  Unpaid Loss and Loss Adjustment Expenses                                 $  302,733        $237,494
  Unearned Premiums                                                           197,839         145,484
                                                                           ----------        --------
     Total Policy Liabilities and Accruals                                    500,572         382,978
  Loans Payable                                                                31,341          22,000
  Premiums Payable                                                             25,659          20,868
  Other Liabilities                                                            31,458          23,388
                                                                           ----------        --------
     Total Liabilities                                                        589,030         449,234
                                                                           ----------        --------
Minority Interest in Consolidated Subsidiaries:
  Company Obligated Mandatorily Redeemable
  Preferred Securities of Subsidiary Trust Holding
  Solely Debentures of Company                                                     --          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, 21,509,723 and
   13,431,408 Shares Issued and Outstanding                                   268,509          46,582
  Notes Receivable from Shareholders                                           (3,373)         (2,287)
  Accumulated Other Comprehensive Income                                        8,461          13,494
  Retained Earnings                                                           155,095         124,536
                                                                           ----------        --------
     Total Shareholders' Equity                                               428,692         182,325
                                                                           ----------        --------
     Total Liabilities and Shareholders' Equity                            $1,017,722        $730,464
                                                                           ==========        ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                       31
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                  For the Years Ended December 31,
                                                                           -----------------------------------------------
                                                                               2001             2000              1999
                                                                           -----------       -----------       -----------
<S>                                                                        <C>               <C>               <C>
Revenue:
  Net Earned Premiums                                                          296,093           227,292           164,915
  Net Investment Income                                                         32,426            25,803            20,695
  Net Realized Investment Gain                                                   3,357            11,718             5,700
  Other Income                                                                     587             8,981             4,722
                                                                           -----------       -----------       -----------
     Total Revenue                                                             332,463           273,794           196,032
                                                                           -----------       -----------       -----------
Losses and Expenses:
  Loss and Loss Adjustment Expenses                                            222,581           175,163           122,491
  Net Reinsurance Recoveries                                                   (42,926)          (43,859)          (23,081)
                                                                           -----------       -----------       -----------
  Net Loss and Loss Adjustment Expenses                                        179,655           131,304            99,410
  Acquisition Costs and Other
   Underwriting Expenses                                                        97,020            75,054            53,793
  Other Operating Expenses                                                       6,841            14,679             8,939
                                                                           -----------       -----------       -----------
     Total Losses and Expenses                                                 283,516           221,037           162,142
                                                                           -----------       -----------       -----------
Minority Interest:  Distributions on Company Obligated
  Mandatorily Redeemable Preferred Securities of
  Subsidiary Trust                                                               2,749             7,245             7,245
                                                                           -----------       -----------       -----------
Income Before Income Taxes                                                      46,198            45,512            26,645
                                                                          -----------       -----------       -----------
Income Tax Expense (Benefit):
  Current                                                                       18,216            17,666             8,360
  Deferred                                                                      (2,577)           (2,924)             (558)
                                                                           -----------       -----------       -----------
     Total Income Tax Expense                                                   15,639            14,742             7,802
                                                                           -----------       -----------       -----------
     Net Income                                                            $    30,559       $    30,770       $    18,843
                                                                           ===========       ===========       ===========
Other Comprehensive Income (Loss), Net of Tax:
  Holding Gain (Loss) Arising during Year                                  $    (2,851)      $     7,604       $    (5,205)
  Reclassification Adjustment                                                   (2,182)           (7,617)           (3,705)
                                                                           -----------       -----------       -----------
Other Comprehensive Loss                                                        (5,033)              (13)           (8,910)
                                                                           -----------       -----------       -----------
Comprehensive Income                                                       $    25,526       $    30,757       $     9,933
                                                                           ===========       ===========       ===========
Per Average Share Data:
  Basic Earnings Per Share                                                 $      1.85       $      2.53       $      1.51
                                                                           ===========       ===========       ===========
  Diluted Earnings Per Share                                               $      1.78       $      2.11       $      1.25
                                                                           ===========       ===========       ===========
Weighted-Average Common Shares Outstanding                                  16,528,601        12,177,989        12,501,165
Weighted-Average Share Equivalents Outstanding                                 656,075         2,411,552         2,614,399
                                                                           -----------       -----------       -----------
Weighted-Average Shares and Share Equivalents
 Outstanding                                                                17,184,676        14,589,541        15,115,564
                                                                           ===========       ===========       ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                       32
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF CHANGES
                             IN SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                   For the Years Ended December 31,
                                                                                ---------------------------------------
                                                                                  2001           2000            1999
                                                                                --------       --------        --------
<S>                                                                             <C>            <C>             <C>
Common Stock:
  Balance at Beginning of Year                                                  $ 46,582       $ 68,859        $ 44,796
  Issuance of Shares Pursuant to Public Offering                                 114,518             --              --
  Issuance of Shares Pursuant to Stock Purchase
   Contracts                                                                      98,905             --              --
  Issuance of Shares Pursuant to Acquisition Agreement                                --             --          25,000
  Exercise of Employee Stock Options                                               6,437        (23,132)           (517)
  Issuance of Shares Pursuant to Stock Purchase Plans                              2,067            855            (420)
                                                                                --------       --------        --------
     Balance at End of Year                                                      268,509         46,582          68,859
                                                                                --------       --------        --------
Notes Receivable from Shareholders:
  Balance at Beginning of Year                                                    (2,287)        (2,506)         (1,680)
  Notes Receivable Issued Pursuant to Employee
   Stock Purchase Plan                                                            (2,158)          (414)         (1,445)
  Collection of Notes Receivable                                                   1,072            633             619
                                                                                --------       --------        --------
     Balance at End of Year                                                       (3,373)        (2,287)         (2,506)
                                                                                --------       --------        --------
Accumulated Other Comprehensive Income,
  Net of Deferred Income Taxes:
    Balance at Beginning of Year                                                  13,494         13,507          22,417
    Other Comprehensive Loss, Net of Taxes                                        (5,033)           (13)         (8,910)
                                                                                --------       --------        --------
     Balance at End of Year                                                        8,461         13,494          13,507
                                                                                --------       --------        --------
Retained Earnings:
  Balance at Beginning of Year                                                   124,536         93,766          74,923
  Net Income                                                                      30,559         30,770          18,843
                                                                                --------       --------        --------
     Balance at End of Year                                                      155,095        124,536          93,766
                                                                                --------       --------        --------
Common Stock Held in Treasury:
  Balance at Beginning of Year                                                        --        (12,186)         (2,973)
  Common Shares Repurchased                                                           --        (40,766)        (12,081)
  Exercise of Employee Stock Options                                                  --         52,712             975
  Issuance of Shares Pursuant to Stock Purchase Plans                                 --            240           1,893
                                                                                --------       --------        --------
     Balance at End of Year                                                           --             --         (12,186)
                                                                                --------       --------        --------
     Total Shareholders' Equity                                                 $428,692       $182,325        $161,440
                                                                                ========       ========        ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                       33
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                 For the Years Ended December 31,
                                                                          ----------------------------------------------
                                                                            2001              2000                1999
                                                                          ---------         ---------           ---------
<S>                                                                       <C>               <C>                 <C>
Cash Flows from Operating Activities:
  Net Income                                                              $  30,559         $  30,770           $  18,843
  Adjustments to Reconcile Net Income to Net
   Cash Provided by Operating Activities:
    Net Realized Investment Gain                                             (3,357)          (11,718)             (5,700)
    Depreciation and Amortization Expense                                     2,528             3,856               3,371
    Deferred Income Tax Benefit                                              (2,577)           (2,924)               (558)
    Change in Premiums Receivable                                           (26,648)          (20,201)            (11,154)
    Change in Other Receivables                                             (26,944)          (19,292)            (26,159)
    Change in Deferred Acquisition Costs                                     (8,202)           (7,270)             (6,720)
    Change in Income Taxes Recoverable                                       (6,083)          (12,504)               (211)
    Change in Other Assets                                                     (840)             (959)             (1,428)
    Change in Unpaid Loss and Loss Adjustment Expenses                       65,239            49,431              33,590
    Change in Unearned Premiums                                              52,355            33,878              30,073
    Change in Other Liabilities                                              13,320             3,740              13,215
    Tax Benefit from Exercise of Employee Stock Options                      25,799               145                 255
                                                                          ---------         ---------           ---------
     Net Cash Provided by Operating Activities                              115,149            46,952              47,417
                                                                          ---------         ---------           ---------
Cash Flows from Investing Activities:
  Proceeds from Sales of Investments in Fixed
   Maturities                                                               112,676           122,795              64,968
  Proceeds from Maturity of Investments in Fixed
   Maturities                                                                72,650            22,110              39,728
  Proceeds from Sales of Investments in Equity
   Securities                                                                20,864            50,230              37,013
  Cost of Fixed Maturities Acquired                                        (424,852)         (208,513)           (148,411)
  Cost of Equity Securities Acquired                                        (22,529)          (18,861)            (25,686)
  Payment for Acquisition, Net of Cash Acquired                                  --                --              (7,372)
  Purchase of Property and Equipment, Net                                    (1,808)           (3,184)             (1,768)
                                                                          ---------         ---------           ---------
     Net Cash Used for Investing Activities                                (242,999)          (35,423)            (41,528)
                                                                          ---------         ---------           ---------
Cash Flows from Financing Activities:
  Net Proceeds from Public Offering of Common Stock                         114,518                --                  --
  Proceeds from Loans Payable                                                31,341            22,000                  --
  Repayments on Loans Payable                                               (22,000)               --                  --
  Proceeds from Exercise of Employee Stock Options                            3,041             1,853                 203
  Proceeds from Collection of Notes Receivable                                1,072               633                 619
  Proceeds from Shares Issued Pursuant to Stock Purchase Plans                   46               188                  27
  Cost of Common Stock Repurchased                                               --           (12,691)            (12,081)
                                                                          ---------         ---------           ---------
     Net Cash Provided (Used) by Financing Activities                       128,018            11,983             (11,232)
                                                                          ---------         ---------           ---------
Net Increase (Decrease) in Cash and Cash Equivalents                            168            23,512              (5,343)
Cash and Cash Equivalents at Beginning of Year                               49,742            26,230              31,573
                                                                          ---------         ---------           ---------
Cash and Cash Equivalents at End of Year                                  $  49,910         $  49,742           $  26,230
                                                                          =========         =========           =========
Cash Paid During the Year for:
  Income Taxes                                                            $   7,023         $   7,760           $   8,295
  Interest                                                                      689               200                  --

Non-Cash Transactions:
  Acceptance of Mature Shares for Exercise Cost of
   Employee Stock Options                                                 $      --         $   6,811           $      --
  Issuance of Shares Pursuant to Employee
   Stock Purchase Plan in Exchange for Notes Receivable                   $   2,158         $     414           $   1,445

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.

                                       34
<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries

                   Notes to Consolidated Financial Statements

1.   General Information and Significant Accounting Policies

Philadelphia Consolidated Holding Corp. ("Philadelphia Insurance"), and its
subsidiaries (collectively the "Company") doing business as Philadelphia
Insurance Companies, include four property and casualty insurance companies,
Philadelphia Indemnity Insurance Company and Philadelphia Insurance Company,
which are domiciled in Pennsylvania; and Mobile USA Insurance Company and
Liberty American Insurance Company, which are domiciled in Florida (collectively
the "Insurance Subsidiaries"); an underwriting manager, Maguire Insurance
Agency, Inc.; a managing general agency, Mobile Homeowners Insurance Agencies,
Inc; a premium finance company Liberty American Premium Finance Company; and an
investment subsidiary, PCHC Investment Corp. The Company designs, markets, and
underwrites specialty commercial and personal property and casualty insurance
products for select target industries or niches including, among others,
nonprofit organizations; the health, fitness and wellness industry; select
classes of professional liability; the rental car industry; automobile leasing
industry; and personal property and casualty insurance products for the
manufactured housing and homeowners markets. All marketing, underwriting, claims
management, investment, and general administration is provided by the
underwriting manager and managing general agency.


Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company
prepared in conformity with accounting principles generally accepted in the
United States of America ("GAAP"). All significant intercompany balances and
transactions have been eliminated in consolidation. The preparation of financial
statements requires making estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.


(a)  Investments

Fixed maturity investments, classified as Available for Sale, are carried at
market value with the change in unrealized appreciation (depreciation) credited
or charged directly to shareholders' equity, net of applicable deferred income
taxes. Income on fixed maturities is recognized on the accrual basis.

The decision to purchase or sell investments is based on management's assessment
of various factors such as foreseeable economic conditions, including current
interest rates and the interest rate risk, and the liquidity and capital
positions of the Company.

Investments in fixed maturities are adjusted for amortization of premiums and
accretion of discounts to maturity date, except for collateralized mortgage and
asset backed securities which are adjusted for amortization of premiums and
accretion of discounts over their estimated lives. Certain collateralized
mortgage and asset backed securities repayment patterns will change based on
interest rate movements and, accordingly, could impact future investment income
if the reinvestment of the repayment amounts are at lower interest rates than
the underlying securities. Collateralized mortgage and asset backed securities
amounted to $70.9 million and $273.3 million, respectively, at December 31, 2001
and $66.8 million and $103.9 million, respectively, at December 31, 2000. The
collateralized mortgage and asset backed securities held as of December 31, 2001
and 2000 are shorter tranche securities possessing favorable prepayment risk
profiles.

Equity securities are carried at market value with the change in unrealized
appreciation (depreciation) credited or charged directly to shareholders'
equity, net of applicable deferred income taxes.

Realized investment gains and losses are calculated on the specific
identification basis and recorded as income when the securities are sold.

Investments are considered impaired when the Company determines a decline in
value to be other than temporary. Accordingly, such a decline is recorded as a
charge to income in the period this determination is made.

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities" on January 1, 2001. The provisions of SFAS 133 require,
among other things, that all derivatives be recognized in the consolidated
balance sheets as either assets or liabilities and measured at fair value. The
corresponding derivative gains and losses should be reported based upon the
hedge relationship, if such a

                                       35
<PAGE>
relationship exists. Changes in the fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria in SFAS
133 are required to be reported in income. The Company held no derivative
financial instruments, nor embedded financial derivatives, as of December 31,
2001 and 2000.

In November 2000, the Emerging Issues Task Force of the Financial Accounting
Standards Board ("FASB") reached a consensus on impairment accounting for
retained beneficial interests ("EITF 99-20"). Under this consensus, impairment
on certain beneficial interests in securitized assets must be recognized when
(1) the asset's fair value is below its carrying value, and (2) there has been
an adverse change in estimated cash flows. Previously, impairment on such assets
was recognized when the asset's carrying value exceeded estimated cash flows
discounted at a risk free rate of return. The adoption of EITF 99-20 on April 1,
2001 by the Company had an immaterial effect on earnings and financial position.
During 2001 certain structured securities were subject to re-evaluation under
EITF 99-20 as a result of an adverse change in estimated cash flows due to
credit rating downgrades. This re-evaluation resulted in non-cash realized
investment losses of $5.8 million for the year ended December 31, 2001.


(b)  Cash and Cash Equivalents

Cash equivalents, consisting of fixed maturity investments with maturities of
three months or less when purchased and money market funds, are stated at cost
which approximates market value.


(c)  Deferred Acquisition Costs

Policy acquisition costs, which include commissions, premium taxes, fees, and
certain other costs of underwriting policies, are deferred and amortized over
the same period in which the related premiums are earned. Deferred acquisition
costs are limited to the estimated amounts recoverable after providing for
losses and expenses that are expected to be incurred, based upon historical and
current experience. Anticipated investment income is considered in determining
whether a premium deficiency exists. Amortization of policy acquisition costs in
the accompanying consolidated statements of operations and comprehensive income
was $80.2 million, $60.4 million, and $46.5 million for the years ended December
31, 2001, 2000, and 1999, respectively.


(d)  Property and Equipment

Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets.
Costs incurred in developing information systems technology are capitalized and
included in property and equipment. These costs are amortized over their useful
lives from the dates the systems technology becomes operational. Upon disposal
of assets, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in earnings.


(e)  Goodwill

Goodwill amounted to $25.7 million and $30.8 million at December 31, 2001 and
2000, respectively, and was being amortized on a straight line basis over 20
years. During 2001 goodwill was decreased $3.5 million based upon the Company's
current reduced estimate of the contingent additional purchase price for the
Liberty acquisition. The effect of this adjustment had no impact on operations
for 2001.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 eliminates the practice of amortizing goodwill through
periodic charges to earnings and establishes a new methodology for recognizing
and measuring goodwill and other intangible assets. Under this new accounting
standard, the Company will cease goodwill amortization on January 1, 2002 and
will also review goodwill and other intangible assets for any impairment or
other effects of the new standard. The Company will adopt the provisions of SFAS
No. 142 as of January 1, 2002, and does not anticipate a material impact on
financial position or results of operations. Goodwill amortization was $1.5
million in 2001, $1.5 million in 2000 and $0.8 million in 1999.


(f)  Reserves for Unpaid Loss and Loss Adjustment Expenses

The liability for unpaid loss and loss adjustment expenses includes an amount
determined on the basis of claims adjusters' evaluations and an amount, based on
past experience, for losses incurred but not reported. Such liabilities are
necessarily based on estimates, and while management believes that the amount is
adequate, the ultimate liability may be in excess of, or less than, the amount
provided. The methods of making such estimates and establishing the resulting
liabilities are continually reviewed and updated and any adjustments resulting
therefrom are reflected in operations currently.

                                       36
<PAGE>
(g)  Premiums

Premiums are generally earned on a pro rata basis over the terms of the
policies. Premiums applicable to the unexpired terms of the policies in-force
are reported as unearned premiums. The Company records an allowance for doubtful
accounts for premiums receivable balances estimated to be uncollectible. At
December 31, 2001 and 2000 the allowance for doubtful accounts amounted to $1.0
million and $1.4 million, respectively.


(h)  Reinsurance Ceded

In the normal course of business, the Company seeks to reduce the loss that may
arise from events that cause unfavorable underwriting results by reinsuring
certain levels of risk in various areas of exposure with reinsurers. Amounts
recoverable from reinsurers are estimated in a manner consistent with the
reinsured policy. Amounts for reinsurance assets and liabilities are reported
gross.


(i)  Assessments

The Insurance Subsidiaries are subject to state guaranty fund assessments, which
provide for the payment of covered claims or meet other insurance obligations
from insurance company insolvencies, and other assessments related to its
insurance activities. Each state has enacted legislation establishing guaranty
funds and other insurance activity related assessments resulting in a variety of
assessment methodologies. Expense for guaranty fund and insurance activity
related assessments are recognized when it is probable that an assessment will
be imposed, the obligatory event has occurred and the amount of the assessment
is reasonably estimated.


(j)  Income Taxes

The Company files a consolidated federal income tax return. Deferred income
taxes are recognized for the tax consequences of temporary differences by
applying enacted statutory tax rates applicable to the differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. The effect on deferred taxes for a change in tax rates is
recognized in income in the period that includes the enactment date.


(k)  Earnings Per Share

Basic earnings per share has been calculated by dividing net income by the
weighted-average common shares outstanding. Diluted earnings per share has been
calculated by dividing net income by the weighted-average common shares
outstanding and the weighted-average share equivalents outstanding.


(l)  Comprehensive Income

Components of comprehensive income, as detailed in the Consolidated Statements
of Operations and Comprehensive Income, are net of tax. The related tax effect
of Holding Gains (Losses) arising during the year was ($1.5) million, $4.1
million and ($2.8) million in 2001, 2000 and 1999, respectively. The related tax
effect of Reclassification Adjustments was $1.2 million, $4.1 million, and $2.0
million in 2001, 2000 and 1999, respectively.


2.   Acquisition

On July 16, 1999, Philadelphia Insurance closed on its acquisition of Liberty
(Mobile USA Insurance Company, Liberty American Insurance Company, Mobile
Homeowners Insurance Agencies, Inc., and Liberty American Premium Finance
Company) for a purchase price of $45.0 million, and a contingent additional
amount of up to $5.0 million based upon the earnings for the acquired business.
Of the purchase price, $20.0 million was paid in cash and the balance in
1,037,772 shares of common stock of the Company. Based on the Company's current
estimate, no additional future amount will be paid. The acquisition was
accounted for using the purchase method of accounting. Goodwill resulting from
the acquisition amounted to $32.7 million. This amount represents the excess of
acquisition costs over the fair value of net assets acquired.


3.   Statutory Information

Accounting Principles: In December 1998, the National Association of Insurance
Commissioners ("NAIC") adopted the Codification of Statutory Accounting
Principles guidance, which replaces the Accounting Practices and Procedures
manual as the NAIC's primary guidance on statutory accounting as of January 1,
2001. The Codification of Statutory Accounting Principles provides guidance for
areas where statutory accounting was previously silent and changed previous
statutory accounting in some areas (e.g., deferred income taxes, electronic data
processing equipment and software, and uncollected

                                       37
<PAGE>
premiums). The Insurance Departments of Pennsylvania and Florida adopted the
Codification guidance, effective January 1, 2001. The effect of adoption of the
Codification of Statutory Accounting Principles, recorded as a direct increase
to the Company's combined statutory unassigned surplus of it's subsidiaries, was
$15.7 million.

GAAP differs in certain respects from SAP prescribed or permitted by the
Insurance Department of the Commonwealth of Pennsylvania and/or the State of
Florida. The principal differences between SAP and GAAP are as follows:

-    Under SAP, investments in debt securities are carried at amortized cost,
     while under GAAP, investments in debt securities classified as Available
     for Sale are carried at fair value.

-    Under SAP, policy acquisition costs, such as commissions, premium taxes,
     fees, and other costs of underwriting policies are charged to current
     operations as incurred, while under GAAP, such costs are deferred and
     amortized on a pro rata basis over the period covered by the policy.

-    Under SAP, certain assets, designated as "Non-admitted Assets" (such as
     prepaid expenses) are charged against surplus.

-    Under SAP, net deferred income tax assets are admitted following the
     application of certain criteria, with the resulting admitted deferred tax
     amount being credited directly to policyholder surplus.

-    Under SAP, premiums receivable are considered nonadmitted if determined to
     be uncollected based upon aging criteria as defined in SAP.

Financial Information: The statutory capital and surplus of the Insurance
Subsidiaries as of December 31, 2001 and 2000 was $281.0 million and $193.3
million, respectively. Statutory net income for the years ended December 31,
2001, 2000 and 1999 was $28.3 million, $26.2 million, and $19.2 million,
respectively. Capital contributions for the years ended December 31, 2001 and
2000 were $73.0 and $0 million, respectively.

Dividend Restrictions: The Insurance Subsidiaries are subject to various
regulatory restrictions which limit the maximum amount of annual shareholder
dividends allowed to be paid. The maximum dividend which the Insurance
Subsidiaries may pay to Philadelphia Insurance during 2002 without prior
approval is $27.4 million. Dividends paid for the years ended December 31, 2001
and 2000 were $16.8 and $0 million, respectively.

Risk-Based Capital: 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, the Insurance
Subsidiaries capital and surplus at December 31, 2001 is in excess of the
prescribed risk-based capital requirements.


4.   Investments

The Company invests primarily in investment grade fixed maturities which
possessed an average quality rating of AA at December 31, 2001. The cost, gross
unrealized gains and losses and estimated market value of investments as of
December 31, 2001 and 2000 are as follows (in thousands):

                                       38
<PAGE>
<TABLE>
<CAPTION>
                                                                         Gross             Gross            Estimated
                                                                      Unrealized        Unrealized            Market
                                                    Cost (1)             Gains            Losses            Value (2)
                                                    --------          ----------        ----------          ---------
<S>                                                 <C>               <C>               <C>                 <C>
December 31, 2001
Fixed Maturities:
Available for Sale
  U.S. Treasury Securities and
   Obligations of U.S. Government
   Corporations and Agencies                        $ 21,024            $   670            $   --            $ 21,694
  Obligations of States and
   Political Subdivisions                            104,628              2,006               450             106,184
  Corporate and Bank Debt Securities                 157,657              4,212             1,543             160,326
  Collateralized Mortgage Securities                  70,362                831               320              70,873
  Asset Backed Securities                            272,655              2,988             2,304             273,339
---------------------------------------------------------------------------------------------------------------------
  Total Fixed Maturities
   Available for Sale                                626,326             10,707             4,617             632,416
---------------------------------------------------------------------------------------------------------------------
Equity Securities                                     34,065              7,239               312              40,992
---------------------------------------------------------------------------------------------------------------------
Total Investments                                   $660,391            $17,946            $4,929            $673,408
=====================================================================================================================
December 31, 2000
Fixed Maturities:
Available for Sale
  U.S. Treasury Securities and
   Obligations of U.S. Government
   Corporations and Agencies                        $ 21,719            $   160            $    4            $ 21,875
  Obligations of States and
   Political Subdivisions                             82,596              4,035                18              86,613
  Corporate and Bank Debt Securities                 115,684              1,784             1,955             115,513
  Collateralized Mortgage Securities                  65,637              1,452               269              66,820
  Asset Backed Securities                            106,803              1,614             4,505             103,912
---------------------------------------------------------------------------------------------------------------------
  Total Fixed Maturities
  Available for Sale                                 392,439              9,045             6,751             394,733
---------------------------------------------------------------------------------------------------------------------
Equity Securities                                     24,087             18,761               295              42,553
---------------------------------------------------------------------------------------------------------------------
Total Investments                                   $416,526            $27,806            $7,046            $437,286
=====================================================================================================================
</TABLE>

(1)  Original cost of equity securities; original cost of fixed maturities
     adjusted for amortization of premiums and accretion of discounts.
(2)  Estimated market values have been based on quoted market prices.

The Company had no debt or equity investments in a single issuer totaling in
excess of 10% of shareholders' equity at December 31, 2001.

The cost and estimated market value of fixed maturity securities at December 31,
2001, by remaining contractual maturity, are shown below (in thousands).
Expected maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without call or
prepayment penalties.

                                       39
<PAGE>
<TABLE>
<CAPTION>
                                                                             Estimated
                                                                              Market
                                                            Cost (1)         Value (2)
                                                            --------         ---------
<S>                                                         <C>              <C>
Due in One Year or Less                                     $ 26,096         $ 26,703
Due After One Year Through Five Years                        125,719          127,916
Due After Five Years through Ten Years                        48,799           50,107
Due After Ten Years                                           82,695           83,478
Collateralized Mortgage and Asset Backed Securities          343,017          344,212
-------------------------------------------------------------------------------------
                                                            $626,326         $632,416
=====================================================================================
</TABLE>

(1)  Original cost adjusted for amortization of premiums and accretion of
     discounts.
(2)  Estimated market values have been based on quoted market prices.

The sources of net investment income for the years ended December 31, 2001,
2000, and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                    2001              2000              1999
                                  --------          --------          --------
<S>                               <C>               <C>               <C>
Fixed Maturities                   $30,962           $23,396           $18,210
Equity Securities                    1,343             1,414             1,169
Cash and Cash Equivalents            1,908             1,961             2,111
------------------------------------------------------------------------------
Total Investment Income             34,213            26,771            21,490
Investment Expense                  (1,787)             (968)             (795)
------------------------------------------------------------------------------
Net Investment Income              $32,426           $25,803           $20,695
==============================================================================
</TABLE>

There are no material investments in fixed maturity securities that were
non-income producing during the years ended December 31, 2001, 2000, and 1999.
Investment expense includes $107,000, $182,000, and $212,000, in investment
management fees paid to a director of the Company in 2001, 2000, and 1999,
respectively. These transactions are in the ordinary course of business at
negotiated prices comparable to those of transactions with other investment
advisors.

Realized pre-tax gains (losses) on the sale of investments for the years ended
December 31, 2001, 2000, and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                2001             2000             1999
                              -------          -------          -------
<S>                           <C>               <C>               <C>
Fixed Maturities
  Gross Realized Gains        $ 5,023          $   242          $   285
  Gross Realized Losses        (9,979)          (3,607)          (1,079)
-----------------------------------------------------------------------
Net Loss                       (4,956)          (3,365)            (794)
-----------------------------------------------------------------------
Equity Securities
  Gross Realized Gains         10,259           18,685            9,300
  Gross Realized Losses        (1,946)          (3,602)          (2,806)
-----------------------------------------------------------------------
Net Gain                        8,313           15,083            6,494
-----------------------------------------------------------------------
  Total Net Realized
  Investment Gain             $ 3,357          $11,718          $ 5,700
=======================================================================
</TABLE>


5.   Restricted Assets

The Insurance Subsidiaries have investments, principally U.S. Treasury
securities, on deposit with the various states in which they are licensed
insurers. At December 31, 2001 and 2000, the carrying value of the securities on
deposit totaled $13.5 million and $12.5 million, respectively.

Additionally, the Insurance Subsidiaries have investments, principally asset
backed securities, which collateralize the borrowings from the Federal Home Loan
Bank of Pittsburgh, see Note 9. The carrying value of these investments was
$33.9 million and $0 million as of December 31, 2001 and 2000, respectively.

                                       40
<PAGE>
6.   Trust Accounts

The Company maintains investments in trust accounts under reinsurance agreements
with unrelated insurance companies. These investments collateralize the
Company's obligations under the reinsurance agreements. The Company possesses
sole responsibility for investment and reinvestment of the trust account assets.
All dividends, interest and other income, resulting from investment of these
assets are distributed to the Company on a monthly basis. At December 31, 2001
and 2000 the carrying value of these trust fund investments were $11.9 million
and $10.9 million, respectively.

The Company's share of the investments in the trust accounts is included in
investments and cash equivalents, as applicable, in the accompanying
consolidated balance sheets.


7.   Property and Equipment

The following table summarizes property and equipment at December 31, 2001 and
2000 (dollars in thousands):

<TABLE>
<CAPTION>
                                                  December 31,
                                            --------------------------        Estimated Useful
                                              2001              2000            Lives (Years)
                                            --------          --------        ----------------
<S>                                         <C>               <C>             <C>
Furniture, Fixtures and Automobiles         $  3,854          $  3,351                  5
Software, Computer Hardware and
 Telephone Equipment                          14,897            13,767                3-7
Land and Building                              3,585             3,580                 40
Leasehold Improvements                         1,489             1,489              10-12
----------------------------------------------------------------------
                                              23,825            22,187
Accumulated Depreciation and
 Amortization                                (13,743)          (11,711)
----------------------------------------------------------------------
Property and Equipment                      $ 10,082          $ 10,476
======================================================================
</TABLE>

Included in property and equipment are costs incurred in developing or
purchasing information systems technology of $6.3 million and $5.4 million in
2001 and 2000, respectively. Amortization of these costs was $0.8 million, $0.6
million and $0.3 million for the years ended December 31, 2001, 2000 and 1999,
respectively. Depreciation expense, excluding amortization of capitalized
information systems technology costs, was $1.4 million, $1.4 million and $1.5
million, for the years ended December 31, 2001, 2000, and 1999, respectively.

The carrying value of property and equipment is reviewed for recoverability
based on an evaluation of the estimated useful life of such assets.


8.   Liability for Unpaid Loss and Loss Adjustment Expenses

Activity in the liability for Unpaid Loss and Loss Adjustment Expenses is
summarized as follows (in thousands):

                                       41
<PAGE>
<TABLE>
<CAPTION>
                                              2001             2000             1999
                                            --------         --------         --------
<S>                                         <C>              <C>              <C>
Balance at January 1, (1)                   $237,494         $188,063         $154,473
  Less Reinsurance Recoverables (2)           42,030           26,710           17,268
                                            --------         --------         --------
  Net Balance at January 1, (3)              195,464          161,353          137,205
                                            --------         --------         --------
Incurred related to:
  Current Year                               166,220          128,761           99,663
  Prior Years                                 13,435            2,543             (253)
                                            --------         --------         --------
Total Incurred                               179,655          131,304           99,410
                                            --------         --------         --------
Paid related to:
  Current Year                                54,228           36,271           31,493
  Prior Years                                 70,757           60,922           43,769
                                            --------         --------         --------
Total Paid                                   124,985           97,193           75,262
                                            --------         --------         --------
Net Balance at December 31,                  250,134          195,464          161,353
  Plus Reinsurance Recoverables               52,599           42,030           26,710
                                            --------         --------         --------
Balance at December 31,                     $302,733         $237,494         $188,063
                                            ========         ========         ========
</TABLE>

(1)  1999 Adjusted to include $3,323 gross unpaid loss and loss adjustment
     expenses for Mobile USA Insurance Company as of acquisition date.

(2)  1999 Adjusted to include $1,148 reinsurance recoverables for Mobile USA
     Insurance Company as of acquisition date.

(3)  1999 Adjusted to include $2,175 net unpaid loss and loss adjustment
     expenses for Mobile USA Insurance Company as of acquisition date.

As a result of changes in estimates of insured events in prior years, the
Company increased losses and loss adjustment expenses incurred by $13.4 million
in 2001. Such development was primarily due to losses emerging at a higher rate
on automobile leases expiring in 2001 on residual value policies underwritten in
prior years than had been originally anticipated when the initial reserves were
estimated.


9.   Loans Payable

The Company had aggregate borrowings of $31.3 million and $0 million as of
December 31, 2001 and 2000, respectively, from the Federal Home Loan Bank of
Pittsburgh. These borrowings bear interest at adjusted LIBOR and mature twelve
months from inception. The proceeds from these borrowings were invested in asset
backed securities and collateralized mortgage obligations to achieve a positive
spread between the rate of interest on these securities and the borrowing rates.
The weighted-average interest rate on borrowings outstanding as of December 31,
2001 was 2.07%.

In November 2000 the Company, pursuant to a Board of Directors authorization,
entered into an unsecured revolving credit facility for aggregate borrowings of
up to $22.0 million at any one time outstanding with a maturity date of 364 days
after closing. During 2000, $22.0 million of the facility was utilized by the
Company to pay a withholding tax liability as a result of the CEO electing to
have shares otherwise issuable withheld in satisfaction of the minimum
withholding tax attributable to the exercise of stock options. Borrowings under
the facility bore interest at adjusted LIBOR and unused commitments under the
facility were subject to a fee of 20 basis points per annum. Interest expense
amounted to $0.1 million and $0.2 million for the years ended December 31, 2001
and 2000, respectively. During the first quarter 2001 the Company repaid all
aggregate borrowings and cancelled the commitment under this revolving credit
facility.


10.  Income Taxes

The composition of deferred tax assets and liabilities and the related tax
effects as of December 31, 2001 and 2000 are as follows (in thousands):

                                       42
<PAGE>
<TABLE>
<CAPTION>

                                                                              December 31,
                                                                         -----------------------
                                                                          2001            2000
                                                                         -------         -------
<S>                                                                      <C>             <C>
Assets:
  Loss Reserve Discounting                                               $12,308         $10,252
  Excess of Tax Over Financial Reporting Earned Premium                   11,492           8,821
  Excess of Financial Reporting Over Tax Net Realized Investment           2,029              --
   Losses
  Deferred Compensation                                                       97             777
  Other Assets                                                               399             515
------------------------------------------------------------------------------------------------
Total Assets                                                              26,325          20,365
================================================================================================

Liabilities:
  Deferred Acquisition Costs                                              14,534          11,663
  Unrealized Appreciation of Securities                                    4,556           7,266
  Property and Equipment Basis                                               548             470
  Other Liabilities                                                          491              57
------------------------------------------------------------------------------------------------
Total Liabilities                                                         20,129          19,456
------------------------------------------------------------------------------------------------
Net Deferred Income Tax Asset                                            $ 6,196         $   909
================================================================================================
</TABLE>

The following table summarizes the differences between the Company's effective
tax rate for financial statement purposes and the federal statutory rate
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                  Amount of Tax    Percent
                                                                  -------------    -------
<S>                                                               <C>              <C>
For the year ended December 31, 2001:
  Federal Tax at Statutory Rate                                      $16,169           35
  Nontaxable Municipal Bond Interest and Dividends Received           (1,456)          (3)
   Exclusion
  Nondeductible Goodwill Amortization                                    523            1
  Other, Net                                                             403            1
-----------------------------------------------------------------------------------------
Income Tax Expense                                                   $15,639           34%
=========================================================================================

For the year ended December 31, 2000:
  Federal Tax at Statutory Rate                                      $15,929           35%
  Nontaxable Municipal Bond Interest and Dividends Received
   Exclusion                                                          (1,884)          (4)
  Nondeductible Goodwill Amortization                                    522            1
  Other, Net                                                             175           --
-----------------------------------------------------------------------------------------
Income Tax Expense                                                   $14,742           32%
=========================================================================================

For the year ended December 31, 1999:
  Federal Tax at Statutory Rate                                      $ 9,326           35%
  Nontaxable Municipal Bond Interest and Dividends Received
   Exclusion                                                          (1,931)          (7)
  Nondeductible Goodwill Amortization                                    292            1
  Other, Net                                                             115           --
-----------------------------------------------------------------------------------------
Income Tax Expense                                                   $ 7,802           29%
=========================================================================================
</TABLE>

Income taxes recoverable amounted to $13.3 million at December 31, 2000. Of such
amount, $8.6 million of prior year tax payments were received during January
2001. The remaining recoverable amount was applied to 2001.

Philadelphia Insurance has entered into tax sharing agreements with each of its
subsidiaries. Under the terms of these agreements, the income tax provision is
computed as if each subsidiary were filing a separate federal income tax return,
including adjustments for the income tax effects of net operating losses and
other special tax attributes, regardless of whether those attributes are
utilized in the Company's consolidated federal income tax return.


11.  Minority Interest in Consolidated Subsidiaries

During 1998, the Company issued 10.350 million FELINE PRIDESSM at $10.00 per
security and PCHC Financing I, the Company's business trust subsidiary, issued
1,000,000 7.0% Trust Originated Preferred Securities with a stated liquidation
amount per trust preferred security equal to $10.00. The 10.350 million FELINE
PRIDESSM consisted of 9.350 million units referred to as Income Prides and 1.000
million units referred to as Growth Prides. Each Income Prides consisted of a
unit comprised of (a) a purchase contract under which the holder purchased a
number of shares of Philadelphia Consolidated Holding Corp. common stock on May
16, 2001 (equal to .3858 shares per FELINE PRIDESSM) under the terms specified
in

                                       43
<PAGE>
the stock purchase contract and (b) beneficial ownership of a 7.0% Trust
Originated Preferred Security issued by PCHC Financing I and representing an
undivided beneficial ownership in the assets of PCHC Financing I. Each holder
received aggregate cumulative cash distributions at the annual rate of 7.00% of
the $10.00 stated amount for the security, payable quarterly in arrears. Each
Growth Prides consisted of a unit with a face amount of $10.00 comprised of (a)
a purchase contract under which (i) the holder purchased a number of shares of
Philadelphia Consolidated Holding Corp. common stock on May 16, 2001 (equal to
..3858 shares per FELINE PRIDESSM) under the terms specified in the stock
purchase contract and (ii) the Company paid the holder contract adjustment
payments at the rate of .50% of the stated amount per annum and (b) a 1/100
undivided beneficial ownership interest in a treasury security having a
principal amount at maturity equal to $1,000 and maturing on May 15, 2001.

On May 16, 2001, the Company issued 4.0 million common shares to satisfy the
stock purchase contract obligation from the Company's 1998 FELINE PRIDESSM
offering. The issuance of such shares resulted in a $98.9 million increase in
Shareholders' Equity and a corresponding decrease in the Minority Interest In
Consolidated Subsidiaries balance.


12.  Shareholders' Equity

Basic and diluted earnings per share are calculated as follows (dollars and
share data in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                   As of and For the Years Ended December 31,
                                                                 ---------------------------------------------
                                                                  2001                2000              1999
                                                                 -------             -------           -------
<S>                                                              <C>                 <C>               <C>
Weighted-Average Common Shares Outstanding                        16,529              12,178            12,501
Weighted-Average Share Equivalents Outstanding                       656               2,412             2,615
                                                                 -------             -------           -------
Weighted-Average Shares and Share Equivalents outstanding         17,185              14,590            15,116
                                                                 =======             =======           =======

Net Income                                                       $30,559             $30,770           $18,843
                                                                 =======             =======           =======
Basic Earnings Per Share                                         $  1.85             $  2.53           $  1.51
                                                                 =======             =======           =======
Diluted Earnings Per Share                                       $  1.78             $  2.11           $  1.25
                                                                 =======             =======           =======
</TABLE>

During the fourth quarter of 2001, the Company closed on its public offering of
an aggregate of 3.6 million shares of its common stock. Proceeds from the
offering amounted to $114.5 million (after underwriting and associated costs).
The Company contributed $70.0 million of the net proceeds to its subsidiaries in
2001, of which $60.0 million was contributed to the Insurance Subsidiaries. The
remaining proceeds are presently being held for general corporate purposes.

Under the Company's stock option plan, stock options may be granted for the
purchase of common stock at a price not less than the fair market value on the
date of grant. Options are primarily exercisable after the expiration of five
years following the grant date. Under this plan, the Company has reserved
2,475,000 shares of common stock for issuance pursuant to options granted under
the plan.

In addition to stock options granted pursuant to the Company's stock option
plan, the Company's Board of Directors have granted previous awards of 2,613,492
stock options. During 2000 all such stock options were exercised.

The Company has chosen to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost for the Company's compensation instruments is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.

The following is a summary of the Company's option activity, including
weighted-average option information:

                                       44
<PAGE>
<TABLE>
<CAPTION>

                                                     2001                             2000                          1999
                                          ----------------------------   ---------------------------     ---------------------------
                                                          Exercise                      Exercise                        Exercise
                                                            Price                         Price                           Price
                                           Options      Per Option (1)    Options     Per Option (1)      Options     Per Option (1)
                                          ---------     --------------   ----------   --------------     ---------    --------------
<S>                                       <C>           <C>               <C>          <C>               <C>          <C>
Outstanding at beginning of
 year                                     1,330,075         $12.68        3,835,917       $ 5.55         3,637,167        $ 4.85
Granted                                     572,500         $27.09          272,500       $18.32           257,500        $15.87
Exercised                                  (392,000)        $ 8.09       (2,640,842)      $ 2.61           (46,250)       $ 4.40
Canceled                                    (57,500)        $19.68         (137,500)      $18.28           (12,500)       $20.43
                                          ---------                      ----------                      ---------
Outstanding at end of year                1,453,075         $19.32        1,330,075       $12.68         3,835,917        $ 5.55
                                          =========                      ==========                      =========

Exercisable at end of year                  296,950                          21,050                      2,661,892

Weighted-average fair
 value of options granted
 during the year                                            $10.99                        $ 7.75                          $ 6.76
</TABLE>

<TABLE>
<CAPTION>

                                              Exercise                       Exercisable
                               Outstanding      Price        Remaining           at          Exercise
                                   At            Per        Contractual       December         Price
Range of Exercise Prices        December     Option (1)   Life (Years) (1)    31, 2001          Per
                                31, 2001                                                    Option (1)
------------------------------------------------------------------------------------------------------
<S>                            <C>           <C>          <C>                <C>            <C>
$2.61 to $9.31                    296,950       $8.65           4.2            296,950        $8.65
$13.88 to $19.75                  441,125      $16.02           7.4                  -            -
$20.50 to $27.00                  557,500      $25.01           8.8                  -            -
$27.63 to $34.63                  157,500      $29.93           9.6                  -            -
                                ---------                                       -------
                                1,453,075      $19.32                           296,950        $8.65
                                =========                                       =======
</TABLE>

(1)  Weighted Average.

The Company has established the following non-qualified stock purchase plans:

Employee Stock Purchase Plan (the "Stock Purchase Plan"): The aggregate maximum
number of shares that may be issued pursuant to the Stock Purchase Plan as
amended is 1,000,000. Shares may be purchased under the Stock Purchase Plan by
eligible employees during designated one-month offering periods established by
the Compensation Committee of the Board of Directors at a purchase price of the
lesser of 85% of the fair market value of the shares on the first business day
of the offering period or the date the shares are purchased. The purchase price
of shares may be paid by the employee over six years pursuant to the execution
of a promissory note. The promissory note(s) are collateralized by such shares
purchased under the Stock Purchase Plan and are interest free. Under the Stock
Purchase Plan, the Company issued 103,855 and 54,463 shares in 2001 and 2000,
respectively. The weighted-average fair value of those purchase rights granted
in 2001 and 2000 was $3.85 and $3.08, respectively.

Directors Stock Purchase Plan ("Directors Plan"): The Directors Plan has been
established for the benefit of non-employee Directors. The aggregate maximum
number of shares that may be issued pursuant to the Directors Plan is 50,000.
Non-employee Directors, during monthly offerings periods, may designate a
portion of his or her fees to be used for the purchase of shares under the terms
of the Directors Plan at a purchase price of the lesser of 85% of the fair
market value of the shares on the first business day of the offering period or
the date the shares are purchased. Under the Directors Plan, the Company issued
1,709 and 2,207 shares in 2001 and 2000, respectively. The weighted-average fair
value of those purchase rights granted in 2001 and 2000 was $4.56 and $2.64,
respectively.

Preferred Agents Stock Purchase Plan ("Preferred Agents Plan"): The Preferred
Agents Plan has been established for the benefit of eligible Preferred Agents.
The aggregate maximum number of shares that may be issued pursuant to the
Preferred Agents Plan is 200,000. Eligible Preferred Agents during designated
offering periods may either remit cash or have the Company withhold from
commissions or other compensation amounts to be used for the purchase of shares
under the terms of the Preferred Agents Plan at a purchase price of the lesser
of 85% of the fair market value of the shares on the first business day of the
offering period or the date the shares are purchased. Under the Preferred Agents
Plan, the Company issued 0 and

                                       45
<PAGE>
13,528 shares in 2001 and 2000, respectively. The weighted-average fair value of
those purchase rights granted in 2000 was $2.48.

The following represents pro forma information as if the Company recorded
compensation costs using the fair value of the issued compensation instruments
(the results may not be indicative of the actual effect on net income in future
years) (in thousands, except per average common share data):

<TABLE>
<CAPTION>
                                                                2001            2000            1999
                                                              -------         -------         -------
<S>                                                           <C>             <C>             <C>
Net Income As Reported                                        $30,559         $30,770         $18,843
Assumed Stock Compensation Cost                                 1,543             947             657
                                                              -------         -------         -------
Pro Forma Net Income                                          $29,016         $29,823         $18,186
                                                              =======         =======         =======
Diluted Earnings Per Average Common Share as Reported         $  1.78         $  2.11         $  1.25
                                                              =======         =======         =======
Pro Forma Diluted Earnings Per Average Common Share           $  1.69         $  2.04         $  1.20
                                                              =======         =======         =======
</TABLE>

The fair value of options at date of grant was estimated using the Black-Scholes
valuation model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                       2001          2000          1999
                                       ----          ----          ----
<S>                                    <C>           <C>           <C>
Expected Stock Volatility              32.0%         30.6%         31.6%
Risk-Free Interest Rate                 4.7%          6.2%          5.9%
Expected Option Life (Years)            6.0           6.0           6.0
Expected Dividends                      0.0%          0.0%          0.0%
</TABLE>


13.  Stock Repurchase Authorization

On September 14, 2001, the Company's Board of Directors increased the
authorization for the Company to repurchase up to a total of $55.0 million of
its common stock. For the three year period ended December 31, 2001, the Company
repurchased 1.6 million shares for approximately $24.9 million under this
authorization.


14.  Reinsurance

In the normal course of business, the Company has entered into various
reinsurance contracts with unrelated reinsurers. The Company participates in
such agreements for the purpose of limiting loss exposure and diversifying
business. Reinsurance contracts do not relieve the Company from its obligation
to policyholders.

The loss and loss adjustment expense reserves ceded under such arrangements were
$52.6 million and $42.0 million at December 31, 2001 and 2000, respectively. The
Company evaluates the financial condition of its reinsurers to minimize its
exposure to losses from reinsurer insolvencies. The percentage of ceded
reinsurance reserves (excluding reserves ceded to voluntary and mandatory pool
mechanisms) that are with companies rated "A" (Excellent) or better by A.M. Best
Company is 97.0% and 99.2% as of December 31, 2001 and 2000, respectively.
Additionally, approximately 3%, 4% and 4% of the Company's net written premiums
for the years ended December 31, 2001, 2000, and 1999, respectively, were
assumed from an unrelated reinsurance company.

                                       46
<PAGE>
The effect of reinsurance on premiums written and earned is as follows (in
thousands):

<TABLE>
<CAPTION>

                                              Written            Earned
                                              --------          --------
<S>                                           <C>               <C>
For the Year Ended December 31, 2001:
  Direct Business                             $464,491          $409,814
  Reinsurance Assumed                            9,074            11,249
  Reinsurance Ceded                            139,748           124,970
------------------------------------------------------------------------
Net Premiums                                  $333,817          $296,093
------------------------------------------------------------------------
Percentage Assumed of Net                                            3.8%
========================================================================

For the Year Ended December 31, 2000:
  Direct Business                             $350,603          $319,591
  Reinsurance Assumed                           11,256             8,747
  Reinsurance Ceded                             98,430           101,046
------------------------------------------------------------------------
Net Premiums                                  $263,429          $227,292
------------------------------------------------------------------------
Percentage Assumed of Net                                            3.8%
========================================================================

For the Year Ended December 31, 1999:
  Direct Business                             $271,312          $243,667
  Reinsurance Assumed                            6,767             4,339
  Reinsurance Ceded                             94,008            83,091
------------------------------------------------------------------------
Net Premiums                                  $184,071          $164,915
------------------------------------------------------------------------
Percentage Assumed of Net                                            2.6%
========================================================================
</TABLE>


15.  Profit Sharing

The Company has a defined contribution Profit Sharing Plan, which includes a
401K feature, covering substantially all employees. Under the plan, employees
may contribute up to an annual maximum of the lesser of 15% of eligible
compensation or the applicable Internal Revenue Code limit in a calendar year.
The Company makes a matching contribution in an amount equal to 75% of the
participant's pre-tax contribution, subject to a maximum of 6% of the
participant's eligible compensation. The Company may also make annual
discretionary profit sharing contributions at each plan year end. Participants
are fully vested in the Company's contribution upon completion of four years of
service. The Company's total contributions to the plan were $0.6 million, $0.6
million and $0.3 million in 2001, 2000, and 1999, respectively.


16.  Commitments and Contingencies

The Company is subject to routine legal proceedings in connection with its
property and casualty insurance business. The Company is not involved in any
pending or threatened legal or administrative proceedings, which management
believes can reasonably be expected to have a material adverse effect on the
Company's financial condition or results of operations.

The Company currently leases office space to serve as its headquarters location
and 36 field offices for its production underwriters. In addition, the Company
leases certain computer equipment. Rental expense for these operating leases was
$2.6 million, $2.2 million and $1.7 million for the years ended December 31,
2001, 2000, and 1999, respectively.

At December 31, 2001 the Company has open commitments of $1.1 million under
certain limited partnership agreements. The future minimum rental payments
required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2001 were as follows (in
thousands):

<TABLE>
<CAPTION>
Year Ending December 31:
------------------------
<S>                                      <C>
2002                                     $ 2,709
2003                                       1,968
2004                                       1,687
2005                                       1,660
2006 and Thereafter                        3,037
------------------------------------------------
Total Minimum Payments Required          $11,061
================================================
</TABLE>

                                       47
<PAGE>
17.  Summary of Quarterly Financial Information - Unaudited

The following quarterly financial information for each of the three months ended
March 31, June 30, September 30 and December 31, 2001 and 2000 is unaudited.
However, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the results of operations for
such periods, have been made for a fair presentation of the results shown (in
thousands, except share and per share data):

<TABLE>
<CAPTION>

                                                                                  Three Months Ended
                                                       ---------------------------------------------------------------------------
                                                        March 31,             June 30,          September 30,         December 31,
                                                          2001                  2001                2001                  2001
                                                       -----------           -----------        -------------        -------------
<S>                                                    <C>                   <C>                <C>                  <C>
Net Earned Premiums                                    $    66,523           $    71,703         $    77,755          $    80,112
Net Investment Income                                  $     8,042           $     8,091         $     8,238          $     8,055
Net Realized Investment Gain                           $     2,299           $       318         $       488          $       252
Net Loss and Loss Adjustment Expenses                  $    39,152           $    42,866         $    50,640          $    46,997
Acquisition Costs and Other
 Underwriting Expenses                                 $    22,468           $    22,695         $    25,880          $    25,977

Minority Interest:
  Distributions on Company Obligated
   Mandatorily Redeemable Preferred
   Securities Of Subsidiary Trust                      $     1,811           $       938         $        --          $        --
Net Income                                             $     7,714           $     7,736         $     5,972          $     9,137

Basic Earnings Per Share                               $      0.57           $      0.50         $      0.34          $      0.48
Diluted Earnings Per Share                             $      0.54           $      0.48         $      0.32          $      0.46

Weighted-Average Common Shares
 Outstanding                                            13,477,940            15,587,962          17,808,317           19,147,755
Weighted-Average Share Equivalents
 Outstanding                                               701,604               692,256             704,534              684,796
                                                       -----------           -----------         -----------          -----------
Weighted-Average Shares and Share
 Equivalents Outstanding                                14,179,544            16,280,218          18,512,851           19,832,551
                                                       ===========           ===========         ===========          ===========
</TABLE>

<TABLE>
<CAPTION>
                                               March 31,           June 30,         September 30,        December 31,
                                                 2000                 2000               2000                2000
                                              -----------         -----------       -------------        ------------
<S>                                           <C>                 <C>               <C>                  <C>
Net Earned Premiums                           $    48,627         $    54,291        $    59,271          $    65,103
Net Investment Income                         $     6,264         $     5,832        $     6,030          $     7,677
Net Realized Investment Gain                  $        93         $       389        $     3,556          $     7,680
Net Loss and Loss Adjustment Expenses         $    28,240         $    31,973        $    33,970          $    37,121
Acquisition Costs and Other
 Underwriting Expenses                        $    16,719         $    17,317        $    19,532          $    21,486

Minority Interest:
  Distributions on Company Obligated
   Mandatorily Redeemable Preferred
   Securities of Subsidiary Trust             $     1,811         $     1,812        $     1,811          $     1,811
Net Income                                    $     5,665         $     5,802        $     8,128          $    11,175

Basic Earnings Per Share                      $      0.46         $      0.48        $      0.69          $      0.90
Diluted Earnings Per Share                    $      0.38         $      0.39        $      0.56          $      0.78

Weighted-Average Common Shares
 Outstanding                                   12,327,797          12,122,135         11,825,698           12,437,348
Weighted-Average Share Equivalents
 Outstanding                                    2,496,325           2,581,779          2,603,161            1,838,712
                                              -----------         -----------        -----------          -----------
Weighted-Average Shares and Share
 Equivalents Outstanding                       14,824,122          14,703,914         14,428,859           14,276,060
                                              ===========         ===========        ===========          ===========
</TABLE>

                                       48
<PAGE>
18.  Segment Information

The Company's operations are classified into three reportable business segments:
The Commercial Lines Underwriting Group which has underwriting responsibility
for the Commercial Automobile and Commercial Property and Commercial multi-peril
package insurance products; The Specialty Lines Underwriting Group which has
underwriting responsibility for the professional liability insurance products;
and The Personal Lines Group which designs, markets and underwrites personal
property and casualty insurance products for the Manufactured Housing and
Homeowners markets. Effective June 30, 2000, due to a change in market focus,
the previously reported Specialty Property Underwriting Group segment was
restructured resulting in the combination of this Underwriting Group with the
Commercial Lines Underwriting Group. Accordingly, prior information has been
reclassified to reflect this change. The reportable segments operate solely
within the United States.

The segments follow the same accounting policies used for the Company's
consolidated financial statements as described in the summary of significant
accounting policies. Management evaluates a segment's performance based upon
certain underwriting results.

Following is a tabulation of business segment information for each of the past
three years. Corporate information is included to reconcile segment data to the
consolidated financial statements (in thousands):

                                       49
<PAGE>
<TABLE>
<CAPTION>
                                                    Commercial      Specialty         Personal
                                                      Lines           Lines            Lines            Corporate           Total
                                                    ----------      ---------         --------          ---------         ----------
<S>                                                 <C>             <C>               <C>               <C>               <C>
2001:
  Gross Written Premiums                             $315,948         $79,317         $ 78,300           $     --         $  473,565
                                                     -------------------------------------------------------------------------------
  Net Written Premiums                               $223,700         $69,772         $ 40,345           $     --         $  333,817
                                                     -------------------------------------------------------------------------------
Revenue:
  Net Earned Premiums                                $189,835         $68,156         $ 38,102           $     --         $  296,093
  Net Investment Income                                    --              --               --             32,426             32,426
  Net Realized Investment Gain                             --              --               --              3,357             3,357
  Other Income                                             --              --            2,964             (2,377)              587
                                                     -------------------------------------------------------------------------------
  Total Revenue                                       189,835          68,156           41,066             33,406            332,463
                                                     -------------------------------------------------------------------------------
Losses and Expenses:
   Net Loss and Loss Adjustment Expenses              117,429          42,840           19,386                 --            179,655
   Acquisition Costs and Other Underwriting
    Expenses                                               --              --               --             97,020             97,020
   Other Operating Expenses                                --              --            1,546              5,295              6,841
                                                     -------------------------------------------------------------------------------
   Total Losses and Expenses                          117,429          42,840           20,932            102,315            283,516
                                                     -------------------------------------------------------------------------------
Minority Interest:  Distributions on Company
 Obligated Mandatorily Redeemable Preferred
 Securities of Subsidiary Trust                            --              --               --              2,749              2,749
                                                     -------------------------------------------------------------------------------
Income Before Income Taxes                             72,406          25,316           20,134            (71,658)            46,198
Total Income Tax Expense                                   --              --               --             15,639             15,639
                                                     -------------------------------------------------------------------------------
Net Income                                           $ 72,406         $25,316         $ 20,134           $(87,297)        $   30,559
                                                     ===============================================================================
Total Assets                                         $     --         $    --         $167,940           $849,782         $1,017,722
                                                     ===============================================================================
2000:
  Gross Written Premiums                             $239,446         $68,193         $ 54,233           $     --         $  361,872
                                                     -------------------------------------------------------------------------------
  Net Written Premiums                               $163,430         $67,860         $ 32,139           $     --         $  263,429
                                                     -------------------------------------------------------------------------------
Revenue:
  Net Earned Premiums                                $142,250         $56,884         $ 28,158           $     --         $  227,292
  Net Investment Income                                    --              --               --             25,803             25,803
  Net Realized Investment Gain                             --              --               --             11,718             11,718
  Other Income                                             --              --           11,720             (2,739)             8,981
                                                     -------------------------------------------------------------------------------
  Total Revenue                                       142,250          56,884           39,878             34,782            273,794
                                                     -------------------------------------------------------------------------------
Losses and Expenses:
   Net Loss and Loss Adjustment Expenses               85,677          32,448           13,179                 --            131,304
   Acquisition Costs and Other Underwriting
    Expenses                                               --              --               --             75,054             75,054
   Other Operating Expenses                                --              --           10,227              4,452             14,679
                                                     -------------------------------------------------------------------------------
   Total Losses and Expenses                           85,677          32,448           23,406             79,506            221,037
                                                     -------------------------------------------------------------------------------
Minority Interest:  Distributions on Company
 Obligated Mandatorily Redeemable Preferred
 Securities of Subsidiary Trust                            --              --               --              7,245              7,245
                                                     -------------------------------------------------------------------------------
Income Before Income Taxes                             56,573          24,436           16,472            (51,969)            45,512
Total Income Tax Expense                                   --              --               --             14,742             14,742
                                                     -------------------------------------------------------------------------------
Net Income                                           $ 56,573         $24,436         $ 16,472           $(66,711)        $   30,770
                                                     ===============================================================================
Total Assets                                         $     --         $    --         $154,874           $575,590         $  730,464
                                                     ===============================================================================
1999:
  Gross Written Premiums                             $200,972         $48,532         $ 25,414           $     --         $  274,918
                                                     -------------------------------------------------------------------------------
  Net Written Premiums                               $129,078         $40,936         $ 14,057           $     --         $  184,071
                                                     -------------------------------------------------------------------------------
Revenue:
  Net Earned Premiums                                $118,623         $33,433         $ 12,859           $     --         $  164,915
  Net Investment Income                                    --              --               --             20,695             20,695
  Net Realized Investment Gain                             --              --               --              5,700              5,700
  Other Income                                             --              --            5,843             (1,121)             4,722
                                                     -------------------------------------------------------------------------------
  Total Revenue                                       118,623          33,433           18,702             25,274            196,032
                                                     -------------------------------------------------------------------------------
Losses and Expenses:
   Net Loss and Loss Adjustment Expenses               72,286          17,873            9,251                 --             99,410
   Acquisition Costs and Other Underwriting
    Expenses                                               --              --               --             53,793             53,793
   Other Operating Expenses                                --              --            5,938              3,001              8,939
                                                     -------------------------------------------------------------------------------
   Total Losses and Expenses                           72,286          17,873           15,189             56,794            162,142
                                                     -------------------------------------------------------------------------------
Minority Interest:  Distributions on Company
  Obligated Mandatorily Redeemable Preferred
  Securities of Subsidiary Trust                           --              --               --              7,245              7,245
                                                     -------------------------------------------------------------------------------
Income Before Income Taxes                             46,337          15,560            3,513            (38,765)            26,645
Total Income Tax Expense                                   --              --               --              7,802              7,802
                                                     -------------------------------------------------------------------------------
Net Income                                           $ 46,337         $15,560         $  3,513           $(46,567)        $   18,843
                                                     ===============================================================================
Total Assets                                         $     --         $    --         $ 98,503           $500,548         $  599,051
                                                     ===============================================================================
</TABLE>

                                       50
<PAGE>
Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Not applicable.


                                    PART III

Certain information required by Part III is omitted from this Report in that the
Company will file a definitive proxy statement pursuant to Regulation 14A (the
"Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference.


Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information concerning the Company's director and executive
         officers required by this Item is incorporated by reference to the
         Proxy Statement under the caption "Management-Directors and Executive
         Officers".


Item 11. EXECUTIVE COMPENSATION

         The information required by this Item is incorporated by reference to
         the Proxy Statement under the captions "Executive Compensation", "Stock
         Option Grants", "Stock Option Exercises and Holdings" and "Directors
         Compensation".


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item is incorporated by reference to
         the Proxy Statement under the caption "Security Ownership of Certain
         Beneficial Owners and Management".


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item is incorporated by reference to
         the Proxy Statement under the caption "Additional Information Regarding
         the Board".


                                    PART IV


Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K


(a) Financial Statements and Exhibits

     1. The Financial Statements and Financial Statement Schedules listed in the
accompanying index on page 29 are filed as part of this Report.

     2. Exhibits: The Exhibits listed on the accompanying Index to Exhibits
immediately following the financial statement schedules are filed as part of, or
incorporated by reference into, this Report.

<TABLE>
<CAPTION>
Exhibit No.             Description
-----------             -----------
<S>       <C>           <C>
3.1       *             Articles of Incorporation of Philadelphia Insurance, as amended to date.
3.1.1     *             Amendment to Articles of Incorporation of Philadelphia Insurance.
3.2       *             By-laws of Philadelphia Insurance, as amended to date.
10.1      *(1)          Amended and Restated Key Employees' Stock Option Plan.
10.1.1    ********(1)   Amended and Restated Key Employees' Stock Option Plan.
10.2      *(1)          Key Employees' Stock Bonus Plan.
10.2.1    *(1)          Excerpt of Board of Directors and Shareholders Resolution amending Key Employees' Stock
                        Bonus Plan.
10.6      *             Casualty Excess of Loss Reinsurance Agreement No. 14P-106,401,402, effective January 1, 1990, with Swiss
                        Re, as amended to date.
10.7      *             Property Quota Share Reinsurance Agreement No. 14P-202, effective December 9, 1989, with Swiss Re, as
                        amended to date.
</TABLE>

                                       51
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.              Description
-----------              -----------
<S>       <C>            <C>
10.8      *              Casualty Quota Share Reinsurance Agreement No. 14P-201, effective January 1, 1989, with Swiss Re, as
                         amended to date.
10.9      *              Retrocession Contract No. 80101, effective October 1, 1990, with Swiss Re, as amended to date, together
                         with related Casualty Quota Share Reinsurance Agreement No. X21-201, as amended to
                         date.
10.10     *              Retrocession Contract No. 81100/81101, effective October 1, 1990, with Swiss Re, as amended to date,
                         together with related Property Quota Share Reinsurance Agreement No. DP2AB, effective October 1, 1990,
                         as amended to date.
10.11     *              Retrocession Contract No. 80100/80103, effective October 1, 1990, with Swiss Re, as amended to date,
                         together with related Casualty Quota Share Reinsurance Agreement No. DC2ABC, effective October 1, 1990,
                         as amended to date.
10.12     *              Agreement of Reinsurance no. B367, dated June 11, 1991, with General Reinsurance Corporation, as amended to
                         date.
10.13     *              Agreement of Reinsurance No. A271, dated July 2, 1993, with General Reinsurance Corporation.
10.14     *              General Agency Agreement, effective December 1, 1987, between MIA and Providence Washington Insurance
                         Company, as amended to date, together with related Quota Share Reinsurance Agreements, as amended to date.
10.15     *              E & O Insurance Policy effective July 20, 1993.
10.15.1   *******        E & O Insurance Policy effective July 20, 1996.
10.15.2   *********      E & O Insurance Policy effective July 20, 1997.
10.16     *              Minutes of the Board of Directors Meeting dated October 20, 1992, and excerpts from the Minutes of the
                         Board of Directors Meeting dated November 16, 1992.
10.17     *(1)           Letter dated July 9, 1993 from James J. Maguire, confirming verbal agreements concerning options.
10.18     *(1)           James J. Maguire Stock Option Agreements.
10.18.1   ***(1)         Amendment to James J. Maguire Stock Option Agreements.
10.19     *(1)           Wheelways Salary Savings Plus Plan Summary Plan Description.
10.20     *              Key Man Life Insurance Policies on James J. Maguire
10.21     *              Reinsurance Pooling Agreement dated August 14, 1992, between PIIC and PIC.
10.22     *              Tax Sharing Agreement, dated July 16, 1987, between Philadelphia Insurance and PIC, as amended to date.
10.23     *              Tax Sharing Agreement, dated November 1, 1986, between Philadelphia Insurance and PIIC, as amended to date.
10.24     *(1)           Management Agreement dated May 20, 1991, between PIIC and MIA, as amended to date.
10.24.1   *******(1)     Management Agreement dated May 20, 1991, between PIIC and MIA, as amended September 25, 1996.
10.25     *(1)           Management Agreement dated October 23, 1991, between PIC and MIA, as amended to date.
10.25.1   *******(1)     Management Agreement dated October 23, 1991, between PIC and MIA, as amended September 25, 1996.
10.26     *              General Mutual Release and Settlement of All Claims dated July 2, 1993, with the Liquidator of Integrity
                         Insurance Company.
10.27     *              Settlement Agreement and General Release with Robert J. Wilkin, Jr., dated August 18, 1993.
10.28     **             Lease tracking portfolio assignment agreement.
10.29     ****(1)        James J. Maguire Split Dollar Life Insurance Agreement, Collateral Assignment and Joint and Last Survivor
                         Flexible Premium Adjustable Life Insurance Policy Survivorship Life.
10.30     *****          Allenbrook Software License Agreement, dated September 26, 1995.
10.31     *****          Sublease Agreement dated August 24, 1995 with CoreStates Bank, N.A.
10.32     *****          Lease Agreement dated August 30, 1995 with The Prudential Insurance Company of America.
10.33     ******(1)      Employee Stock Purchase Plan.
10.34     ******(1)      Cash Bonus Plan.
10.35     ******(1)      Executive Deferred Compensation Plan.
10.36     ********(1)    Directors Stock Purchase Plan
10.37     *********      Lease Agreement dated May 8, 1997 with Bala Plaza, Inc.
10.38     *********      Casualty Excess of Loss Reinsurance Agreement effective January 1, 1997, together with Property Per Risk
                         Excess of Loss Reinsurance Agreement effective January 1, 1997 and Property Facultative Excess of Loss
                         Automatic  Reinsurance Agreement effective January 1, 1997.
</TABLE>

                                       52
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.              Description
-----------              -----------
<S>       <C>            <C>
10.39     *********      Automobile Leasing Residual Value Excess of Loss Reinsurance Agreement effective January 1, 1997, together
                         with Second Casualty Excess of Loss Reinsurance Agreement, effective January 1, 1997.
10.40     **********     Inspire Software License Agreement, dated December 31, 1998.
10.41     **********     Lease Agreement dated July 6, 1998 with Bala Plaza, Inc.
10.42     ***********    Plan and Agreement of Merger Between Philadelphia Consolidated Holding Corp. and The Jerger Co. Inc.
11        ************   Statement regarding computation of earnings per share.
21        *              List of Subsidiaries of the Registrant.
23        ************   Consent of PricewaterhouseCoopers LLP.
24        *              Power of Attorney
99.1      ************   Report of Independent Accountants of PricewaterhouseCoopers LLP on Financial Statement Schedules.
</TABLE>

<TABLE>
<S>                 <C>
*                   Incorporated by reference to the Exhibit filed with the Registrant's Form S-1 Registration Statement under the
                    Securities Act of 1933 (Registration No. 33-65958).
**                  Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 and
                    incorporated by reference.
***                 Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30,
                    1994 and incorporated by reference.
****                Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31,
                    1995 and incorporated by reference.
*****               Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and
                    incorporated by reference.
******              Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30,
                    1996 and incorporated by reference.
*******             Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
                    incorporated by reference.
********            Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997
                    and incorporated by reference.
*********           Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
**********          Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
***********         Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31,
                    1999.
************        Filed herewith.
(1)                 Compensatory Plan or Arrangement, or Management Contract.
</TABLE>


(b)  Reports on Form 8-K:

     The Company filed the following reports on Form 8-K during the quarterly
period ended December 31, 2001

                    <TABLE>
                    <CAPTION>
                    Date of Report                 Item Reported
                    <S>                            <C>
                    October 19, 2001               Supplemental financial data for the three and
                                                   nine months ended September 30, 2001 and 2000

                    November 2, 2001               Press Release - Philadelphia Consolidated Holding
                                                   Corp. announces proposed public offering

                    November 20, 2001              Purchase Agreement by and among Philadelphia
                                                   Consolidated Holding Corp., James J. Maguire and
                                                   Merrill Lynch & Co., Merrill Lynch, Pierce,
                                                   Fenner & Smith Incorporated and Bank of America
                                                   Securities LLC

                                                   Press Release - Philadelphia Consolidated Holding
                                                   Corp. announces pricing of public offering of
                                                   4,000,000 shares
                    </TABLE>

                                       53
<PAGE>


                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.


                                         By: /s/ James J. Maguire
                                         ---------------------------------------
                                         James J. Maguire
                                         Chairman of the Board of Directors
                                          And Chief Executive Officer
                                         March 25, 2002


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


<TABLE>
<CAPTION>

                   Signature                              Title                                       Date
                   ---------                              -----                                       ----
           <S>                            <C>                                                    <C>
                                                                                                 March 25, 2002
             /s/ James J. Maguire                Chairman of the Board of
           ---------------------------       Directors and Chief Executive
               James J. Maguire             Officer (Principal Executive Officer)




              /s/ Craig P. Keller            Senior Vice President, Secretary,                   March 25, 2002
           ---------------------------    Treasurer, and Chief Financial Officer
                Craig P. Keller                  (Principal Financial and
                                                   Accounting Officer)



           /s/ James J. Maguire, Jr.              President & COO, Director                      March 25, 2002
           ---------------------------
             James J. Maguire, Jr.



              /s/ Sean S. Sweeney           Executive Vice President, Director                   March 25, 2002
          ----------------------------
                Sean S. Sweeney



           /s/ Elizabeth H. Gemmill                      Director                                March 25, 2002
           ---------------------------
             Elizabeth H. Gemmill



          /s/ William J. Henrich, Jr.                    Director                                March 25, 2002
          ----------------------------
            William J. Henrich, Jr.



            /s/ Paul R. Hertel, Jr.                      Director                                March 25, 2002
           ---------------------------
              Paul R. Hertel, Jr.



             /s/ Thomas J. McHugh                        Director                                March 25, 2002
           ---------------------------
               Thomas J. McHugh



             /s/ Michael J. Morris                       Director                                March 25, 2002
           ---------------------------
               Michael J. Morris



              /s/ Dirk A. Stuurop                        Director                                March 25, 2002
           ---------------------------
                Dirk A. Stuurop



           /s/ J. Eustace Wolfington                     Director                                March 25, 2002
           ---------------------------
             J. Eustace Wolfington



               /s/ James L. Zech                         Director                                March 25, 2002
           ---------------------------
                 James L. Zech

</TABLE>

                                       54




<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries
 Schedule I - Summary of Investments - Other than Investments in Related Parties
                             As of December 31, 2001
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
COLUMN A                                                COLUMN B     COLUMN C        COLUMN D
                                                                    Estimated    Amount at which
                                                                      Market       shown in the
Type of Investment                                        Cost *      Value        Balance Sheet
------------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>          <C>
Fixed Maturities:
Bonds:
  United States Government and Government
  Agencies and Authorities                              $ 21,024     $ 21,694        $ 21,694
  States, Municipalities and Political Subdivisions      104,628      106,184         106,184
  Public Utilities                                        20,564       20,652          20,652
  All Other Corporate Bonds                              476,052      479,759         479,759
Redeemable Preferred Stock                                 4,058        4,127           4,127
                                                        --------     --------        --------
     Total Fixed Maturities                              626,326      632,416         632,416
                                                        --------     --------        --------
Equity Securities:
Common Stocks:
  Banks, Trust and Insurance Companies                     3,792        5,411           5,411
  Industrial, Miscellaneous and all other                 30,273       35,581          35,581
                                                        --------     --------        --------
     Total Equity Securities                              34,065       40,992          40,992
                                                        --------     --------        --------
     Total Investments                                  $660,391     $673,408        $673,408
                                                        ========     ========        ========
</TABLE>

*    Original cost of equity securities; original cost of fixed maturities
     adjusted for amortization of premiums and accretion of discounts.

                                      S-1
<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries
                                   Schedule II
                  Condensed Financial Information of Registrant
                                  (Parent Only)
                                 Balance Sheets
                        (In Thousands, Except Share Data)

<TABLE>
<CAPTION>

                                                                       As of December 31,
                                                                    -----------------------
                                                                      2001           2000
                                                                    --------       --------
<S>                                                                 <C>            <C>
                         ASSETS

Cash and Cash Equivalents                                           $     --       $    246
Equity in and Advances to Unconsolidated Subsidiaries (a)            428,578        301,847
Income Taxes Recoverable from affiliates                                 689          2,320
Other Assets                                                               1              4
                                                                    --------       --------
     Total Assets                                                   $429,268       $304,417
                                                                    ========       ========

          LIABILITIES AND SHAREHOLDERS' EQUITY

Loans Payable                                                       $     --       $ 22,000
Other Liabilities                                                        576          1,187
                                                                    --------       --------
     Total Liabilities                                                   576         23,187
                                                                    --------       --------
Minority Interest in Consolidated Subsidiaries:
  Company Obligated Mandatorily Redeemable Preferred Securities
   of Subsidiary Trust Holding Solely Debentures of Company               --         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, 21,509,723 Shares Issued and Outstanding, and
   13,431,408 Shares Issued                                          268,509         46,582
  Notes Receivable from Shareholders                                  (3,373)        (2,287)
  Accumulated Other Comprehensive Income                               8,461         13,494
  Retained Earnings                                                  155,095        124,536
                                                                    --------       --------
                                                                     428,692        182,325
                                                                    --------       --------
     Total Liabilities and Shareholders' Equity                     $429,268       $304,417
                                                                    ========       ========
</TABLE>

(a)  This has been eliminated in the Company's Consolidated Financial
     Statements.

 See Notes to Consolidated Financial Statements included in Item 8, pages 35-50.

                                      S-2
<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries
                             Schedule II, Continued
                  Condensed Financial Information of Registrant
                                  (Parent Only)
                            Statements of Operations
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                       For the Years Ended December 31,
                                                                      -----------------------------------
                                                                       2001          2000          1999
                                                                      -------       -------      --------
<S>                                                                   <C>           <C>          <C>
Revenue:
  Dividends from Subsidiaries (a)                                     $21,074       $20,122      $ 65,356
                                                                      -------       -------      --------
     Total Revenue                                                     21,074        20,122        65,356
                                                                      -------       -------      --------
Other Expenses                                                          1,248         1,077           684
                                                                      -------       -------      --------
     Total Expenses                                                     1,248         1,077           684
                                                                      -------       -------      --------
Minority Interest:  Distributions on Company
 Mandatorily Redeemable Preferred Securities of Subsidiary Trust        2,749         7,245         7,245
                                                                      -------       -------      --------
Income, Before Income Taxes and Equity in Earnings of
 Unconsolidated Subsidiaries                                           17,077        11,800        57,427
Income Tax Benefit                                                     (1,399)       (2,913)       (2,775)
                                                                      -------       -------      --------
Income, Before Equity in Earnings of Unconsolidated
 Subsidiaries                                                          18,476        14,713        60,202
Equity in Earnings of Unconsolidated Subsidiaries                      12,083        16,057       (41,359)
                                                                      -------       -------      --------
  Net Income                                                          $30,559       $30,770      $ 18,843
                                                                      =======       =======      ========
</TABLE>

(a)  This item has been eliminated in the Company's Consolidated Financial
     Statements.

 See Notes to Consolidated Financial Statements included in Item 8, pages 35-50.

                                      S-3
<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries
                             Schedule II, Continued
                  Condensed Financial Information of Registrant
                                  (Parent Only)
                            Statements of Cash Flows
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                                 For the Years Ended December 31,
                                                                              -------------------------------------
                                                                                2001           2000          1999
                                                                              ---------      --------      --------
<S>                                                                           <C>            <C>           <C>
Cash Flows From Operating Activities:
  Net Income                                                                  $  30,559      $ 30,770      $ 18,843
  Adjustments to Reconcile Net Income to Net
  Cash Provided (Used) by Operating Activities:
    Equity in Earnings of Unconsolidated Subsidiaries                           (12,083)      (16,057)       41,359
    Change in Other Liabilities                                                    (611)           46           (37)
    Change in Other Assets                                                            3            (1)           11
    Change in Income Taxes Recoverable                                          (20,911)          455        (3,450)
    Tax Benefit from Exercise of Employee Stock Options                          25,799           145           255
                                                                              ---------      --------      --------
      Net Cash Provided by Operating Activities                                  22,756        15,358        56,981
                                                                              ---------      --------      --------

Cash Flows Used by Investing Activities:
  Payment for Acquisition                                                            --            --       (25,676)
  Net Transfers to Subsidiaries (a)                                            (119,679)      (27,080)      (20,023)
                                                                              ---------      --------      --------
      Net Cash Used by Investing Activities                                    (119,679)      (27,080)      (45,699)
                                                                              ---------      --------      --------

Cash Flows From Financing Activities:
  Net Proceeds From Public Offering of Common Stock                             114,518            --            --
  Proceeds from Loans Payable                                                        --        22,000            --
  Repayments on Loans Payable                                                   (22,000)           --            --
  Proceeds from Exercise of Employee Stock Options                                3,041         1,853           203
  Proceeds from Collection of Notes Receivable                                    1,072           633           619
  Proceeds from Shares Pursuant to Stock Purchase Plans                              46           188            27
  Cost of Common Stock Repurchased                                                   --       (12,691)      (12,081)
                                                                              ---------      --------      --------
      Net Cash Provided (Used) by Financing Activities                           96,677        11,983       (11,232)
                                                                              ---------      --------      --------

Net Increase (Decrease) in Cash and Equivalents                                    (246)          261            50
Cash and Cash Equivalents at Beginning of Year                                      246           (15)          (65)
                                                                              ---------      --------      --------
Cash and Cash Equivalents at End of Year                                      $      --      $    246      $    (15)
                                                                              =========      ========      ========

Cash Dividends Received From Unconsolidated Subsidiaries                      $  21,074      $ 20,122      $ 65,356
                                                                              =========      ========      ========
Non-Cash Transactions:
  Acceptance of Mature Shares for Exercise Cost of Employee Stock Options     $      --      $  6,811      $     --
  Issuance of Shares Pursuant to Employee Stock Purchase Plan in exchange
   for Notes Receivable                                                       $   2,158      $    414      $  1,445

Acquisitions:
  Fair Value Of Assets Acquired                                               $      --      $     --      $ 77,310
  Cash Paid                                                                          --            --       (25,676)
  Common Stock Issued                                                                --            --       (25,000)
                                                                              ---------      --------      --------
  Liabilities Assumed                                                         $      --      $     --      $ 26,634
                                                                              =========      ========      ========
</TABLE>

(a)  This item has been eliminated in the Company's Consolidated Financial
     Statements.

 See Notes to Consolidated Financial Statements included in Item 8, pages 35-50.

                                      S-4
<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries
               Schedule III - Supplementary Insurance Information
          As of and For the Year Ended December 31, 2001, 2000 and 1999
                                 (In Thousands)

<TABLE>
<CAPTION>
COLUMN A                COLUMN B         COLUMN C         COLUMN D     COLUMN E       COLUMN F

                                       Future Policy
                                          Benefits,                  Other Policy
                     Deferred Policy   Losses, Claims                 Claims and
                       Acquisition        and Loss        Unearned     Benefits        Premium
Segment                   Costs           Expenses        Premiums     Payable         Revenue
-------              ---------------   --------------     --------   ------------     --------
<S>                  <C>               <C>                <C>        <C>              <C>
2001:
  Commercial Lines       $    --          $212,134        $124,522                    $189,835
  Specialty Lines             --            82,735          39,725                      68,156
  Personal Lines              --             7,864          33,592                      38,102
  Corporate               41,526                --              --                          --
                         -------          --------        --------                    --------
Total                    $41,526          $302,733        $197,839                    $296,093
                         =======          ========        ========                    ========

2000:
  Commercial Lines       $    --          $161,801        $ 84,418                    $142,250
  Specialty Lines             --            67,260          35,549                      56,884
  Personal Lines              --             8,433          25,517                      28,158
  Corporate               33,324                --              --                          --
                         -------          --------        --------                    --------
Total                    $33,324          $237,494        $145,484                    $227,292
                         =======          ========        ========                    ========

1999:
  Commercial Lines       $    --          $144,917        $ 62,962                    $118,623
  Specialty Lines             --            35,314          27,236                      33,433
  Personal Lines              --             7,832          21,408                      12,859
  Corporate               26,054                --              --                          --
                         -------          --------        --------                    --------
Total                    $26,054          $188,063        $111,606                    $164,915
                         =======          ========        ========                    ========
<CAPTION>
COLUMN A                COLUMN G       COLUMN H        COLUMN I       COLUMN J       COLUMN K

                                       Benefits,     Amortization
                                        Claims,       of Deferred
                          Net        Losses, and        Policy         Other
                       Investment     Settlement     Acquisition     Operating       Premiums
Segment                  Income        Expenses         Costs         Expenses       Written
-------                ----------    -----------     ------------    ---------       --------
<S>                    <C>           <C>             <C>             <C>             <C>
2001:
  Commercial Lines      $    --        $117,429        $    --        $    --        $223,700
  Specialty Lines            --          42,840             --             --          69,772
  Personal Lines             --          19,386             --          1,546          40,345
  Corporate              32,426              --         80,239          5,295              --
                        -------        --------        -------        -------        --------
Total                   $32,426        $179,655        $80,239        $ 6,841        $333,817
                        =======        ========        =======        =======        ========

2000:
  Commercial Lines      $    --        $ 85,677        $    --        $    --        $163,430
  Specialty Lines            --          32,448             --             --          67,860
  Personal Lines             --          13,179             --         10,227          32,139
  Corporate              25,803              --         60,415          4,452              --
                        -------        --------        -------        -------        --------
Total                   $25,803        $131,304        $60,415        $14,679        $263,429
                        =======        ========        =======        =======        ========

1999:
  Commercial Lines      $    --        $ 72,286        $    --        $    --        $129,078
  Specialty Lines            --          17,873             --             --          40,936
  Personal Lines             --           9,251             --          5,938          14,057
  Corporate              20,695              --         46,451          3,001              --
                        -------        --------        -------        -------        --------
Total                   $20,695        $ 99,410        $46,451        $ 8,939        $184,071
                        =======        ========        =======        =======        ========
</TABLE>

                                      S-5
<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries
                            Schedule IV - Reinsurance
                                 Earned Premiums
              For the Years Ended December 31, 2001, 2000 and 1999
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
COLUMN A                             COLUMN B      COLUMN C      COLUMN D     COLUMN E       COLUMN F
--------------------------------------------------------------------------------------------------------
                                                   Ceded to      Assumed                  Percentage of
                                      Gross         Other      from Other                     Amount
                                      Amount       Companies    Companies    Net Amount   Assumed to Net
--------------------------------------------------------------------------------------------------------
<S>                                  <C>           <C>         <C>           <C>          <C>
2001

Property and Casualty Insurance      $409,814      $124,970      $11,249      $296,093         3.8%
========================================================================================================

2000

Property and Casualty Insurance      $319,591      $101,046      $ 8,747      $227,292         3.8%
========================================================================================================

1999

Property and Casualty Insurance      $243,667      $ 83,091      $ 4,339      $164,915         2.6%
========================================================================================================
</TABLE>

                                      S-6
<PAGE>
            Philadelphia Consolidated Holding Corp. and Subsidiaries
          Schedule VI - Supplemental Information Concerning Property -
                         Casualty Insurance Operations
         As of and For the Years Ended December 31, 2001, 2000 and 1999
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------



                                           Reserve for
                                              Unpaid
                             Deferred       Claims and
                              Policy          Claim      Discount if                     Net            Net
Affiliation with           Acquisition      Adjustment   any deducted   Unearned       Earned       Investment
Registrant                     Costs         Expenses    in Column C    Premiums      Premiums        Income

COLUMN A                    COLUMN B        COLUMN C       COLUMN D     COLUMN E      COLUMN F       COLUMN G
<S>                        <C>             <C>           <C>            <C>           <C>           <C>
Consolidated Property
 - Casualty Entities

December 31, 2001            $41,526        $302,733          $0        $197,839      $296,093        $32,426

December 31, 2000            $33,324        $237,494          $0        $145,484      $227,292        $25,803

December 31, 1999            $26,054        $188,063          $0        $111,606      $164,915        $20,695
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                           Claims and Claims Adjustment
                           Expenses Incurred Related to



                                                                                Paid Claims
                                   (1)        (2)          Amortization of       and Claim
Affiliation with                 Current     Prior         deferred policy       Adjustment     Net Written
Registrant                        Year        Year        acquisition costs       Expenses        Premiums

COLUMN A                              COLUMN H                COLUMN I            COLUMN J        COLUMN K
<S>                             <C>         <C>           <C>                   <C>             <C>
Consolidated Property
 - Casualty Entities

December 31, 2001               $166,220    $13,435            $80,239            $124,985        $333,817

December 31, 2000               $128,761     $2,543            $60,415             $97,193        $263,429

December 31, 1999                $99,663      ($253)           $46,451             $75,262        $184,071
</TABLE>

                                      S-7
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                                 Exhibit Index

                      For the Year Ended December 31, 2001


<TABLE>
<CAPTION>

Exhibit No.           Page No.              Description
-----------           --------              -----------
<S>                   <C>                   <C>

3.1     *                                   Articles of Incorporation of Philadelphia Insurance, as
                                            amended to date.
3.1.1   *                                   Amendment to Articles of Incorporation of Philadelphia
                                            Insurance.
3.2     *                                   By-laws of Philadelphia Insurance, as amended to date.
10.1    *(1)                                Amended and Restated Key Employees' Stock Option Plan.
10.1.1  ********(1)                         Amended and Restated Key Employers' Stock Option Plan.
10.2    *(1)                                Key Employees' Stock Bonus Plan.
10.2.1  *(1)                                Excerpt of Board of Directors and Shareholders Resolution
                                            amending Key Employees' Stock Bonus Plan.
10.6    *                                   Casualty Excess of Loss Reinsurance Agreement No. 14P-
                                            106,401,402, effective January 1, 1990, with Swiss Re, as
                                            amended to date.
10.7    *                                   Property Quota Share Reinsurance Agreement No. 14P-202,
                                            effective December 9, 1989, with Swiss Re, as amended to
                                            date.
10.8    *                                   Casualty Quota Share Reinsurance Agreement No. 14P-201,
                                            effective January 1, 1989, with Swiss Re, as amended to date.
10.9    *                                   Retrocession Contract No. 80101, effective October 1, 1990,
                                            with Swiss Re, as amended to date, together with related
                                            Casualty Quota Share Reinsurance Agreement No. X21-201,
                                            as amended to date.
10.10   *                                   Retrocession Contract No. 81100/81101, effective October 1,
                                            1990, with Swiss Re, as amended to date, together with
                                            related Property Quota Share Reinsurance Agreement No.
                                            DP2AB, effective October 1, 1990, as amended to date.
10.11   *                                   Retrocession Contract No. 80100/80103, effective October 1,
                                            1990, with Swiss Re, as amended to date, together with
                                            related Casualty Quota Share Reinsurance Agreement No.
                                            DC2ABC, effective October 1, 1990, as amended to date.
10.12   *                                   Agreement of Reinsurance no. B367, dated June 11, 1991,
                                            with General Reinsurance Corporation, as  amended to date.
10.13   *                                   Agreement of Reinsurance No. A271, dated July 2, 1993,
                                            with General Reinsurance Corporation.
10.14   *                                   General Agency Agreement, effective December 1, 1987,
                                            between MIA and Providence Washington Insurance
                                            Company, as amended to date, together with related Quota
                                            Share Reinsurance Agreements, as amended to date.
10.15   *                                   E & O Insurance Policy effective July 20, 1993.
10.15.1 *******                             E & O Insurance Policy effective July 20, 1996.
10.15.2 *********                           E & O Insurance Policy effective July 20, 1997.
10.16   *                                   Minutes of the Board of Directors Meeting dated October 20,
                                            1992, and excerpts from the Minutes of the Board of Directors Meeting dated
                                            November 16, 1992.
</TABLE>

                                      (E-1)

                                      P. 62
<PAGE>
<TABLE>
<CAPTION>

Exhibit No.           Page No.              Description
-----------           --------              -----------
<S>                   <C>                   <C>

10.17   *(1)                                Letter dated July 9, 1993 from James J. Maguire, confirming
                                            verbal agreements concerning options.
10.18   *(1)                                James J. Maguire Stock Option Agreements.
10.18.1 ***(1)                              Amendment to James J. Maguire Stock Option Agreements.
10.19   *(1)                                Wheelways Salary Savings Plus Plan Summary Plan
                                            Description.
10.20   *                                   Key Man Life Insurance Policies on James J. Maguire
10.21   *                                   Reinsurance Pooling Agreement dated August 14, 1992,
                                            between PIIC and PIC.
10.22   *                                   Tax Sharing Agreement, dated July 16, 1987, between
                                            Philadelphia Insurance and PIIC, as amended to date.
10.23   *                                   Tax Sharing Agreement, dated November 1, 1986, between
                                            Philadelphia Insurance and PIIC, as amended to date.
10.24   *(1)                                Management Agreement dated May 20, 1991, between PIIC
                                            and MIA, as amended to date.
10.24.1 *******(1)                          Management Agreement dated May 20, 1991, between PIIC
                                            and MIA, as amended September 25, 1996.
10.25   *(1)                                Management Agreement dated October 23, 1991, between
                                            PIC and MIA, as amended to date.
10.25.1 *******(1)                          Management Agreement dated October 23, 1991, between
                                            PIC and MIA, as amended September 25, 1996.
10.26   *                                   General Mutual Release and Settlement of All Claims dated
                                            July 2, 1993, with the Liquidator of Integrity Insurance
                                            Company.
10.27   *                                   Settlement Agreement and General Release with Robert J.
                                            Wilkin, Jr., dated August 18, 1993.
10.28   **                                  Lease tracking portfolio assignment agreement.
10.29   ****(1)                             James J. Maguire Split Dollar Life Insurance Agreement,
                                            Collateral Assignment and Joint and Last Survivor
                                            Flexible Premium Adjustable Life Insurance Policy
                                            Survivorship Life.
10.30   *****                               Allenbrook Software License Agreement, dated September
                                            26, 1995.
10.31   *****                               Sublease Agreement dated August 24, 1995 with CoreStates
                                            Bank, N.A.
10.32   *****                               Lease Agreement dated August 30, 1995 with The Prudential
                                            Insurance Company of America.
10.33   ******(1)                           Employee Stock Purchase Plan.
10.34   ******(1)                           Cash Bonus Plan.
10.35   ******(1)                           Executive Deferred Compensation Plan.
10.36   ********(1)                         Directors Stock Purchase Plan.
10.37   *********                           Lease Agreement dated May 8, 1997 with Bala Plaza, Inc.
10.38   *********                           Casualty Excess of Loss Reinsurance Agreement effective
                                            January 1, 1997, together with Property Per Risk Excess
                                            of Loss Reinsurance Agreement effective January 1, 1997
                                            and Property Facultative Excess of Loss Automatic
                                            Reinsurance Agreement effective January 1, 1997.
10.39   *********                           Automobile Leasing Residual Value Excess of Loss
                                            Reinsurance Agreement effective January 1, 1997, together
                                            with Second Casualty Excess of Loss Reinsurance
                                            Agreement, effective January 1, 1997.
10.40   **********                          Inspire Software License Agreement, dated December 31, 1998.

</TABLE>

                                     (E-2)

                                     P. 63
<PAGE>
<TABLE>
<CAPTION>

Exhibit No.           Page No.              Description
-----------           --------              -----------
<S>                   <C>                   <C>

10.41   **********                          Lease Agreement dated July 6, 1998 with Bala Plaza, Inc.
10.42   ***********                         Plan and Agreement of Merger Between Philadelphia
                                            Consolidated Holding Corp. and The Jerger Co. Inc.
11      ************  Page 67 of 71         Statement regarding computation of earnings per share.
21      *                                   List of Subsidiaries of the Registrant.
23      ************  Page 69 of 71         Consent of PricewaterhouseCoopers LLP
24      *                                   Power of Attorney
99.1    ************  Page 71 of 71         Report of Independent Accountants of
                                            PricewaterhouseCoopers LLP on Financial Statement
                                            Schedules.
</TABLE>
*              Incorporated by reference to the Exhibit filed with the
               Registrant's Form S-1 Registration Statement under the
               Securities Act of 1933 (Registration No. 33-65958).
**             Filed as an Exhibit to the Company's Annual Report on Form 10-K
               for the year ended December 31, 1993 and incorporated by
               reference.
***            Filed as an Exhibit to the Company's Quarterly Report on
               Form 10-Q for the quarterly period ended September 30, 1994 and
               incorporated by reference.
****           Filed as an Exhibit to the Company's Quarterly Report on
               Form 10-Q for the quarterly period ended March 31, 1995 and
               incorporated by reference.
*****          Filed as an Exhibit to the Company's Annual Report on Form 10-K
               for the year ended December 31, 1995 and incorporated by
               reference.
******         Filed as an Exhibit to the Company's Quarterly Report on
               Form 10-Q for the quarterly period ended September 30, 1996
               and incorporated by reference.
*******        Filed as an Exhibit to the Company's Annual Report on Form 10-K
               for the year ended December 31, 1996 and incorporated by
               reference.
********       Filed as an Exhibit to the Company's Quarterly Report on
               Form 10-Q for the quarterly period ended June 30, 1997 and
               incorporated by reference.
*********      Filed as an Exhibit to the Company's Annual Report on Form 10-K
               for the year ended December 31, 1997.
**********     Filed as an Exhibit to the Company's Annual Report on Form 10-K
               for the year ended December 31, 1998.
***********    Filed as an Exhibit to the Company's Quarterly Report on
               Form 10-Q for the quarterly period ended March 31, 1999.
************   Filed herewith.

(1) Compensatory Plan or Arrangement, or Management Contract.


(b) Reports on Form 8-K:

     The Company filed the following reports on Form 8-K during the quarterly
period ended December 31, 2001

<TABLE>
<CAPTION>

Date of Report           Item Reported
--------------           -------------
<S>                      <C>

October 19, 2001         Supplemental financial data for the
                         three and nine months ended September
                         30, 2001 and 2000

November 2, 2001         Press Release - Philadelphia
                         Consolidated Holding Corp. announces
                         proposed public offering

November 20, 2001        Purchase Agreement by and among
                         Philadelphia Consolidated Holding Corp.,
                         James J. Maguire and Merrill Lynch &
                         Co., Merrill Lynch, Pierce,
</TABLE>

                                     (E-3)

                                     P. 64
<PAGE>
<TABLE>
<CAPTION>

Date of Report           Item Reported
--------------           -------------
<S>                      <C>
                         Fenner & Smith Incorporated and Bank of America
                         Securities LLC

                         Press Release - Philadelphia Consolidated Holding Corp. announces
                         pricing of public offering of 4,000,000 shares
</TABLE>

                                     (E-4)

                                     P. 65