<PAGE>   1
                                        
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

           [X]      Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                For the Quarterly Period Ended September 30, 1998

                         COMMISSION FILE NUMBER 0-22280

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

     PENNSYLVANIA                                         23-2202671
(State of Incorporation)                       (IRS Employer Identification No.)

                            ONE BALA PLAZA, SUITE 100
                         BALA CYNWYD, PENNSYLVANIA 19004
                                 (610) 617-7900
                        (Address, including zip code and
                    telephone number, including area code, of
                    registrant's principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                   YES [x] NO

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of November 12, 1998.

Preferred Stock, $.01 par value, no shares outstanding
Common Stock, no par value, 12,190,363 shares outstanding

<PAGE>   2

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                                      INDEX

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

Part I - Financial Information

         Consolidated Balance Sheets - September 30, 1998 and
           December  31, 1997                                                  3

         Consolidated Statements of Operations - For the three
           and nine months ended September 30, 1998 and 1997                   4

         Consolidated Statements of Comprehensive Income - For
           the three and nine months ended September 30, 1998 and 1997         5

         Consolidated Statements of Changes in Shareholders' Equity - For the
           nine months ended September 30, 1998 and year ended
           December 31, 1997                                                   6

         Consolidated Statements of Cash Flows - For the nine
           months ended September 30, 1998 and 1997                            7

         Notes to Consolidated Financial Statements                            8

         Management's Discussion and Analysis of Results of Operations and
           Financial Condition                                              9-14

Part II - Other Information                                                   15

Signatures                                                                    16

Exhibits                                                                      17


                                       2
<PAGE>   3

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                        As of
                                                              --------------------------
                                                            September 30,     December 31,
                                                                1998             1997
                                                              ---------        ---------
                                                             (Unaudited)
<S>                                                         <C>               <C>    
                               ASSETS
INVESTMENTS:
   FIXED MATURITIES AVAILABLE FOR SALE AT MARKET
     (AMORTIZED COST $265,492 AND $165,052) ...........       $ 273,952        $ 170,678
   EQUITY SECURITIES AT MARKET (COST $47,439
     AND $29,501) .....................................          61,343           46,988
                                                              ---------        ---------
       TOTAL INVESTMENTS ..............................         335,295          217,666
   CASH AND CASH EQUIVALENTS ..........................          28,729           11,933
   ACCRUED INVESTMENT INCOME ..........................           3,228            2,786
   PREMIUMS RECEIVABLE ................................          26,262           15,269
   PREPAID REINSURANCE PREMIUMS AND
     REINSURANCE RECEIVABLES ..........................          20,251           18,573
   DEFERRED ACQUISITION COSTS .........................          15,429           10,970
   PROPERTY AND EQUIPMENT .............................           6,180            5,797
   OTHER ASSETS .......................................           5,528            5,132
                                                              ---------        ---------
       TOTAL ASSETS ...................................       $ 440,902        $ 288,126
                                                              =========        =========
                   LIABILITIES AND SHAREHOLDERS' EQUITY
POLICY LIABILITIES AND ACCRUALS:
   UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES ...........       $ 141,189        $ 122,430
   UNEARNED PREMIUMS ..................................          59,723           42,116
                                                              ---------        ---------
       TOTAL POLICY LIABILITIES AND ACCRUALS ..........         200,912          164,546
   PAYABLE FOR SECURITY PURCHASES .....................           2,991               --
   OTHER LIABILITIES ..................................           9,703            7,948
   DEFERRED INCOME TAXES ..............................           3,838            4,348
                                                              ---------        ---------
       TOTAL LIABILITIES ..............................         217,444          176,842
                                                              ---------        ---------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES:
   COMPANY OBLIGATED MANDATORY 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, 12,329,510 ISSUED
     AND 12,242,431 SHARES ISSUED AND OUTSTANDING .....          44,642           42,788
   NOTES RECEIVABLE FROM SHAREHOLDERS .................          (1,856)          (1,422)
   UNREALIZED INVESTMENT APPRECIATION
   (DEPRECIATION),  NET OF DEFERRED INCOME TAXES ......          14,537           15,023
   RETAINED EARNINGS ..................................          70,330           54,895
                                                              ---------        ---------
                                                                127,653          111,284
   LESS COST OF COMMON STOCK HELD IN TREASURY,
     159,100 SHARES IN  1998 ..........................          (3,100)              --
                                                              ---------        ---------
       TOTAL SHAREHOLDERS' EQUITY .....................         124,553          111,284
                                                              ---------        ---------
       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .....       $ 440,902        $ 288,126
                                                              =========        =========
</TABLE>

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


                                       3
<PAGE>   4

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                  For the Three Months                  For the Nine Months
                                                                   Ended September 30,                  Ended September 30,
                                                            -------------------------------       -------------------------------
                                                                1998               1997               1998               1997
                                                            ------------       ------------       ------------       ------------
<S>                                                         <C>                <C>                <C>                <C>         
REVENUE:
   NET WRITTEN PREMIUMS ..............................      $     41,681       $     30,079       $    104,359       $     83,676
   CHANGE IN NET UNEARNED PREMIUM RESERVE
      (INCREASE) .....................................            (9,516)            (3,587)           (15,617)            (9,633)
                                                            ------------       ------------       ------------       ------------
   NET EARNED PREMIUMS ...............................            32,165             26,492             88,742             74,043
   NET INVESTMENT INCOME .............................             4,446              2,535             10,876              7,150
   NET REALIZED INVESTMENT GAIN ......................             1,609                156              1,708                125
   OTHER INCOME ......................................                57                 57                171                171
                                                            ------------       ------------       ------------       ------------
     TOTAL REVENUE ...................................            38,277             29,240            101,497             81,489
                                                            ------------       ------------       ------------       ------------
LOSSES AND EXPENSES:
   LOSS AND LOSS ADJUSTMENT EXPENSES .................            20,034             16,561             53,661             45,964
   NET REINSURANCE RECOVERIES ........................            (2,596)            (2,132)            (5,416)            (5,222)
                                                            ------------       ------------       ------------       ------------
   NET LOSS AND LOSS ADJUSTMENT EXPENSES .............            17,438             14,429             48,245             40,742
   ACQUISITION COSTS AND OTHER
     UNDERWRITING EXPENSES ...........................            10,159              8,429             27,565             23,233
   OTHER OPERATING EXPENSES ..........................               530                430              1,715              1,609
                                                            ------------       ------------       ------------       ------------
     TOTAL LOSSES AND EXPENSES .......................            28,127             23,288             77,525             65,584
                                                            ------------       ------------       ------------       ------------
MINORITY INTEREST:  DISTRIBUTIONS ON COMPANY OBLIGATED
MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST .....................................             1,742                 --              2,959                 --
                                                            ------------       ------------       ------------       ------------
INCOME BEFORE INCOME TAXES ...........................             8,408              5,952             21,013             15,905
                                                            ------------       ------------       ------------       ------------
INCOME TAX EXPENSE (BENEFIT):
   CURRENT ...........................................             2,363              2,155              5,826              4,881
   DEFERRED ..........................................               (31)              (671)              (248)            (1,058)
                                                            ------------       ------------       ------------       ------------
     TOTAL INCOME TAX EXPENSE ........................             2,332              1,484              5,578              3,823
                                                            ------------       ------------       ------------       ------------
     NET INCOME ......................................      $      6,076       $      4,468       $     15,435       $     12,082
                                                            ============       ============       ============       ============
PER AVERAGE SHARE DATA:
   BASIC EARNINGS PER SHARE(1) .......................      $       0.50       $       0.37       $       1.26       $       0.99
                                                            ============       ============       ============       ============
   DILUTED EARNINGS PER SHARE(1) .....................      $       0.41       $       0.30       $       1.03       $       0.81
                                                            ============       ============       ============       ============
WEIGHTED-AVERAGE COMMON SHARES
   OUTSTANDING(1) ....................................        12,248,331         12,223,940         12,269,595         12,177,948
WEIGHTED-AVERAGE SHARE EQUIVALENTS
   OUTSTANDING(1) ....................................         2,713,348          2,815,533          2,680,099          2,716,700
                                                            ------------       ------------       ------------       ------------
WEIGHTED-AVERAGE SHARES AND SHARE
   EQUIVALENTS OUTSTANDING(1) ........................        14,961,679         15,039,473         14,949,694         14,894,648
                                                            ============       ============       ============       ============
</TABLE>

(1)      1997 share information restated to reflect a two-for-one split of the
         Company's common stock distributed in November 1997.

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


                                       4
<PAGE>   5

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                          For the Three Months          For the Nine Months
                                                           Ended September 30,          Ended September 30,
                                                           1998           1997          1998           1997
                                                         --------       --------      --------       --------
<S>                                                      <C>            <C>           <C>            <C>     
NET INCOME ........................................      $  6,076       $  4,468      $ 15,435       $ 12,082
                                                         --------       --------      --------       --------
OTHER COMPREHENSIVE INCOME, NET OF TAX:
  HOLDING GAIN (LOSS) ARISING DURING PERIOD, NET OF
  TAX .............................................        (2,943)         2,665           624          5,601
  RECLASSIFICATION ADJUSTMENT, NET OF TAX .........        (1,046)            --        (1,110)            --
                                                         --------       --------      --------       --------
OTHER COMPREHENSIVE INCOME (LOSS) .................        (3,989)         2,665          (486)         5,601
                                                         --------       --------      --------       --------
COMPREHENSIVE INCOME ..............................      $  2,087       $  7,133      $ 14,949       $ 17,683
                                                         ========       ========      ========       ========
</TABLE>

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


                                       5
<PAGE>   6

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF CHANGES
                             IN SHAREHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                       For the Nine Months  For the Year Ended
                                                        Ended September 30,   December 31,
                                                              1998                1997
                                                          ------------        ------------
                                                          (Unaudited)
<S>                                                    <C>                  <C>         
COMMON SHARES:
   BALANCE AT BEGINNING OF PERIOD(1) ..............         12,242,431          12,079,612
   ISSUANCE OF SHARES
     PURSUANT TO EMPLOYEE STOCK PURCHASE PLAN .....             50,479              78,569
     PURSUANT TO EMPLOYEE STOCK OPTION PLAN .......             36,600              84,250
                                                          ------------        ------------
       BALANCE AT END OF PERIOD ...................         12,329,510          12,242,431
                                                          ============        ============
COMMON STOCK:
   BALANCE AT BEGINNING OF PERIOD .................       $     42,788        $     41,167
   PURCHASE CONTRACTS OF COMMON STOCK .............                558                  --
                                                                              
   ISSUANCE OF SHARES PURSUANT TO EMPLOYEE
     STOCK PURCHASE PLAN ..........................                887                 898
   EXERCISE OF EMPLOYEE STOCK OPTIONS, NET OF
     TAX BENEFIT ..................................                409                 723
                                                          ------------        ------------
       BALANCE AT END OF PERIOD ...................             44,642              42,788
                                                          ------------        ------------
NOTES RECEIVABLE FROM SHAREHOLDERS:
   BALANCE AT BEGINNING OF PERIOD .................             (1,422)               (924)
   NOTES RECEIVABLE ISSUED PURSUANT TO
     EMPLOYEE STOCK PURCHASE PLAN .................               (849)               (873)
   COLLECTION OF NOTES RECEIVABLE .................                415                 375
                                                          ------------        ------------
       BALANCE AT END OF PERIOD ...................             (1,856)             (1,422)
                                                          ------------        ------------
UNREALIZED INVESTMENT APPRECIATION (DEPRECIATION),
   NET OF DEFERRED INCOME TAXES:
     BALANCE AT BEGINNING OF PERIOD ...............             15,023               7,374
     CHANGE IN UNREALIZED INVESTMENT APPRECIATION
       (DEPRECIATION), NET OF DEFERRED INCOME TAXES               (486)              7,649
                                                          ------------        ------------
       BALANCE AT END OF PERIOD ...................             14,537              15,023
                                                          ------------        ------------
RETAINED EARNINGS:
   BALANCE AT BEGINNING OF PERIOD .................             54,895              38,025
   NET INCOME .....................................             15,435              16,870
                                                          ------------        ------------
       BALANCE AT END OF PERIOD ...................             70,330              54,895
                                                          ------------        ------------
TREASURY STOCK:
   BALANCE AT BEGINNING OF PERIOD .................                 --                  --
   SHARES REPURCHASED .............................             (3,100)                 --
                                                          ------------        ------------
       BALANCE AT END OF PERIOD ...................             (3,100)                 --
                                                          ------------        ------------
       TOTAL SHAREHOLDERS' EQUITY .................       $    124,553        $    111,284
                                                          ============        ============
</TABLE>

(1)      1997 share information restated to reflect a two for one split of the
         Company's common stock distributed in November 1997.

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


                                       6
<PAGE>   7

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           For the Nine Months Ended
                                                                 September 30,
                                                          --------------------------
                                                            1998             1997
                                                          ---------        ---------
<S>                                                       <C>              <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
   NET INCOME .....................................       $  15,435        $  12,082
   ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
     PROVIDED BY OPERATING ACTIVITIES:
     NET REALIZED INVESTMENT GAIN .................          (1,708)            (125)
     DEPRECIATION AND AMORTIZATION EXPENSE ........             918              900
     DEFERRED INCOME TAX BENEFIT ..................            (248)          (1,058)
     CHANGE IN PREMIUMS RECEIVABLE ..................       (10,993)          (8,023)
     CHANGE IN OTHER RECEIVABLES ..................          (2,120)             572
     CHANGE IN DEFERRED ACQUISITION COSTS .........          (4,459)            (830)
     CHANGE IN OTHER ASSETS .......................            (405)          (1,341)
     CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT
     EXPENSES .....................................          18,759           18,774
     CHANGE IN UNEARNED PREMIUMS ..................          17,607            7,252
     CHANGE IN OTHER LIABILITIES ..................           1,966           (1,383)
     CHANGE IN INCOME TAXES PAYABLE ...............              --             (451)
                                                          ---------        ---------
         NET CASH PROVIDED BY OPERATING ACTIVITIES           34,752           26,369
                                                          ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   PROCEEDS FROM SALES OF INVESTMENTS IN FIXED
       MATURITIES AVAILABLE FOR SALE ..............          50,874            3,318
   PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED
       MATURITIES AVAILABLE FOR SALE ..............          12,276            7,285
   PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY
       SECURITIES .................................           5,958            4,069
   COST OF FIXED MATURITIES AVAILABLE FOR
       SALE ACQUIRED ..............................        (159,111)         (36,297)
   COST OF EQUITY SECURITIES ACQUIRED .............         (23,795)         (12,939)
   PURCHASE OF PROPERTY AND EQUIPMENT .............          (1,383)          (1,347)
                                                          ---------        ---------
       NET CASH USED BY INVESTING ACTIVITIES ......        (115,181)         (35,911)
                                                          ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   PROCEEDS FROM OFFERING OF COMPANY OBLIGATED
        MANDATORILY REDEEMABLE PREFERRED SECURITIES
        OF SUBSIDIARY TRUST .......................          99,463               --
   EXERCISE OF EMPLOYEE STOCK OPTIONS, NET
     OF TAX BENEFIT ...............................             409              691
   COLLECTION OF NOTES RECEIVABLE .................             415              286
   PROCEEDS FROM SHARES PURSUANT TO
     EMPLOYEE STOCK PURCHASE PLAN .................              38               24
   COST OF COMMON STOCK REPURCHASED ...............          (3,100)              --
                                                          ---------        ---------
         NET CASH PROVIDED BY FINANCING ACTIVITIES           97,225            1,001
                                                          ---------        ---------
NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS ...............................          16,796           (8,541)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..          11,933           11,483
                                                          ---------        ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........       $  28,729        $   2,942
                                                          =========        =========
CASH PAID DURING THE PERIOD FOR:
   INCOME TAXES ...................................       $   5,184        $   5,005
NON-CASH TRANSACTIONS:
   ISSUANCE OF SHARES PURSUANT TO EMPLOYEE
     STOCK PURCHASE PLAN IN EXCHANGE FOR
     NOTES RECEIVABLE .............................       $     849        $     882
</TABLE>

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


                                       7
<PAGE>   8

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       Basis of Presentation

         The consolidated financial statements as of and for the nine months
         ended September 30, 1998 and 1997 are unaudited, but in the opinion of
         management, have been prepared on the same basis as the annual audited
         consolidated financial statements and reflect all adjustments,
         consisting of normal recurring accruals, necessary for a fair
         presentation of the information set forth therein. The results of
         operations for the nine months ended September 30, 1998 are not
         necessarily indicative of the operating results to be expected for the
         full year or any other period. Certain prior year amounts have been
         reclassified for comparative purposes.

         These financial statements should be read in conjunction with the
         financial statements and notes as of and for the year ended December
         31, 1997 included in the Company's Annual Report on Form 10-K.

2.       Earnings Per Share

         Earnings per common share has been calculated by dividing net income
         for the period by the weighted average number of common shares and
         common share equivalents outstanding during the period.

3.       Comprehensive Income

         In June 1997, the Financial Accounting Standards Board issued Statement
         of Financial Accounting Standards (SFAS) No. 130, "Reporting
         Comprehensive Income." This statement establishes standards for the
         reporting and display of comprehensive income and its components.
         Comprehensive income includes all changes in equity during a period,
         except those resulting from investments by owners and distributions to
         owners.

         The deferred tax expense (benefit) for Holding Gain (Loss) arising for
         the three and nine months ended September 30, 1998 and 1997 amounted to
         ($1,585,000) and $1,435,000, respectively, and $336,000 and $3,016,000,
         respectively. The deferred tax expense for the Reclassification
         Adjustment for the three and nine months ended September 30, 1998
         amounted to $563,000 and $598,000, respectively.

4.       Income Taxes

         The effective tax rate differs from the 35% marginal tax rate
         principally as a result of interest exempt from tax, the dividend
         received deduction and other differences in the recognition of revenues
         and expenses for tax and financial reporting purposes.

5.       Minority Interest in Consolidated Subsidiaries: Company Obligated
         Mandatory Redeemable Preferred Securities of Subsidiary Trust Holding
         Solely Debentures of Company.

         The assets of the Trust consist solely of approximately $106.7 million
         in aggregate principal amount of Debentures of the Company with an
         interest rate of 7.0% per annum and a maturity date of May 16, 2003.


                                       8
<PAGE>   9

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

GENERAL

Although the Company's financial performance is dependent upon its own specific
business characteristics, certain risk factors can affect the profitability of
the Company. These include:

-        Industry factors - Historically the financial performance of the
         commercial property and casualty insurance industry has tended to
         fluctuate in cyclical patterns of soft markets followed by hard
         markets. In the current environment, insurance industry pricing in
         general continues to be soft; however, the Company's strategy is to
         focus on underwriting profits and accordingly the Company's marketing
         organization is being directed into those niche businesses that exhibit
         the greatest potential for underwriting profits.

-        Competition - The Company competes in the commercial property and
         casualty business with other domestic and international insurers having
         greater financial and other resources than the Company.

-        Regulation - The Company's insurance subsidiaries are subject to a
         substantial degree of regulatory oversight, which generally is designed
         to protect the interests of policyholders, as opposed to shareholders.

-        Inflation - Commercial property and casualty insurance premiums are
         established before the amount of losses and loss adjustment expenses,
         or the extent to which inflation may effect such amounts is known.

-        Investment Risk - Substantial future increases in interest rates could
         result in a decline in the market value of the Company's investment
         portfolio and resulting losses and/or reduction in shareholders'
         equity.

RESULTS OF OPERATIONS (NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. SEPTEMBER 30,
1997)

         Premiums: Gross written premiums grew $24.7 million (20.8%) to $143.6
million for the nine months ended September 30, 1998 from $118.9 million for the
same period of 1997; gross earned premiums grew $14.4 million (12.9%) to $126.0
million for the nine months ended September 30, 1998 from $111.6 million for the
same period of 1997; net written premiums increased $20.7 million (24.7%) to
$104.4 million for the nine months ended September 30, 1998 from $83.7 million
for the same period of 1997; and net earned premiums grew $14.7 million (19.9%)
to $88.7 million in 1998 from $74.0 million in 1997. The overall growth in
premiums and the varying growth rates for gross written premiums, gross earned
premiums, net written premiums, and net earned premiums are attributable to the
following factors:

-        Overall premium growth is primarily attributable to: expanded marketing
         efforts relating to commercial auto, commercial package, and specialty
         lines products through the increase in the Company's proprietary field
         organization to a total of 137 professionals, production underwriters
         and customer service representatives; and the continued development and
         growth of the Company's Preferred Agent Program, initiated in 1996,
         wherein business relationships are formed with brokers specializing in
         certain of the Company's business niches, thereby increasing the
         distribution of the Company's niche products. The Company also
         underwrote several new programs which contributed to the overall
         premium growth during 1998.

-        Overall premium growth has been offset in part by the loss of accounts
         in certain market niches due to inadequate pricing levels being
         experienced as a result of market competition. Consistent with its
         underwriting focus, the Company has maintained pricing levels for its
         insurance products reflective of its underwriting assessment. As a
         result, loss in premium writings will occur due to inadequate pricing
         levels.


                                       9
<PAGE>   10

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                                   (continued)

         Net Investment Income: Net investment income approximated $10.9 million
for the nine months ended September 30, 1998 and $7.2 million for the same
period of 1997. Total investments grew to $335.3 million at September 30, 1998
from $212.0 million at September 30, 1997, primarily due to investing the
proceeds from the Company's Feline Prides(SM) securities offering and cash flows
provided from operating activities.

         Net Realized Investment Gain: Net Realized Investment Gains
approximated $1.7 million for the nine months ended September 30,1998 and $.1
million for the same period of 1997. During the third quarter of 1998, the
Company realigned the maturity distribution of certain of its tax exempt and
taxable securities in order to increase after tax investment income.

          Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $7.5 million (18.4%) to $48.2 million for the nine months
ended September 30, 1998 from $40.7 million for the same period of 1997 and the
loss ratio decreased to 54.4% in 1998 from 55.0% in 1997. The increase in net
loss and loss adjustment expenses was due primarily to the 19.9% growth in net
earned premiums.

         Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $4.4 million (19.0%) to $27.6 million
for the nine months ended September 30, 1998 from $23.2 million for the same
period of 1997. This increase was due primarily to the 19.9% growth in net
earned premiums offset in part by changes in product and distribution mix.

         Income Tax Expense: The Company's effective tax rate for the nine
months ended September 30, 1998 and 1997 was 26.6% and 24.0%, respectively. The
effective rates differed from the 35% statutory rate principally due to
investments in tax-exempt securities. The increase in the effective tax rate is
principally due to a greater investment of cash flows in taxable securities
relative to tax-exempt securities and greater net realized investment gains on
the sale of securities in 1998 vs. 1997.

RESULTS OF OPERATIONS (THREE MONTHS ENDED SEPTEMBER 30, 1998 VS SEPTEMBER 30,
1997)

         Premiums: Gross written premiums grew $13.0 million (29.0%) to $57.8
million for the three months ended September 30, 1998 from $44.8 million for the
same period of 1997; gross earned premiums grew $6.7 million (16.4%) to $47.6
million for the three months ended September 30, 1998 from $40.9 million for the
same period of 1997; net written premiums increased $11.6 million (38.5%) to
$41.7 million for the three months ended September 30, 1998 from $30.1 million
for the same period of 1997; and net earned premiums grew $5.7 million (21.5%)
to $32.2 million in 1998 from $26.5 million in 1997. The overall growth in
premiums and the varying growth rates for gross written premiums, gross earned
premiums, net written premiums, and net earned premiums are attributable to
similar factors as addressed in the Premiums caption of the "Results of
Operations" (nine months ended September 30, 1998 vs. September 30, 1997).

         Net Investment Income: Net investment income approximated $4.4 million
for the three months ended September 30, 1998 and $2.5 million for the same
period of 1997. Total investments grew to $335.3 million at September 30, 1998
from $212.0 million at September 30, 1997, primarily due to investing the
proceeds from the Company's Feline Prides(SM) securities offering and cash flows
provided from operating activities.

         Net Realized Investment Gain: Net Realized Investment Gains
approximated $1.6 million for the three months ended September 30,1998 and $.2
million for the same period of 1997. During the third quarter of 1998, the
Company realigned the maturity distribution of certain of its tax-exempt and
taxable securities in order to increase after tax investment income.


                                       10
<PAGE>   11

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                                   (continued)

         Net Loss and Loss Adjustment Expenses: Net loss and loss adjustment
expenses increased $3.0 million (20.8%) to $17.4 million in the third quarter
1998 from $14.4 million in the third quarter of 1997 and the loss ratio
decreased to 54.2% in 1998 from 54.5% in 1997. The increase in net loss and loss
adjustment expenses was due primarily to the 21.5% growth in net earned
premiums.

         Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $1.8 million (21.4%) to $10.2 million
for the three months ended September 30, 1998 from $8.4 million for the same
period of 1997. This increase was due primarily to the 21.5% growth in net
earned premiums.

         Income Tax Expense: The Company's effective tax rate for the three
months ended September 30, 1998 and 1997 was 27.7% and 24.9%, respectively. The
effective rates differed from the 35% statutory rate principally due to
investments in tax-exempt securities. The increase in the effective tax rate is
principally due to a greater investment of cash flows in taxable securities
relative to tax-exempt securities and greater net realized investment gains on
the sale of securities for the three months ended September 30, 1998 vs.
September 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

         For the nine months ended September 30, 1998 the Company's investments
experienced unrealized investment depreciation of $.5 million, net of the
related deferred tax benefit of $.3 million. At September 30, 1998,
approximately 94% of the Company's fixed maturity securities consisted of U.S.
Government securities or securities rated "1" or "2" by the NAIC, approximately
90.0% were rated "A-" or better (with no security rated lower than "BB-") by
Standard & Poor's Corporation.

         On May 4, 1998, the consolidated capitalization of the Company
increased by approximately $99.0 million from the sale of Feline Prides(SM) and
Trust Preferred securities. The sale of Feline Prides(SM) consisted of 9,300,000
units of Income prides with a stated amount of $10.00, 1,000,000 units of Growth
prides with a face amount equal to the stated amount, and 1,000,000 units of
separate Trust Preferred securities with a stated amount of $10.00. $20.0
million from the sale of these securities was contributed to the Company's
insurance subsidiaries. The company anticipates using the remaining funds for
general corporate purposes, which may include acquisitions, (including, without
limitation, acquisitions of programs or books of business), capital
expenditures, additional capital contributions to its subsidiaries and the
repurchase by the Company of its common stock. Additionally, the Company is
obligated to make cash distributions at a rate of 7.0% of the stated amount per
annum for the Income prides and the separate Trust Preferred securities,
commencing May 4, 1998 through May 15, 2001 and payable quarterly in arrears.

         On August 3, 1998, the Company's Board of Directors authorized the
repurchase of up to $10.0 million of the Company's Common Stock. The purchases
will be made from time to time in the open market or through privately
negotiated transactions. The decision to authorize the stock repurchase was
based on the strong relative value currently represented by the Company's stock.
The Company purchased 159,100 shares of common stock during the third quarter
1998 for $3,100,000.

         The Company produced net cash from operations of $34.8 million and
$26.4 million, respectively, for the nine months ended September 30, 1998 and
1997. Management believes that the Company has adequate ability to pay all
claims and meet all other cash needs.

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


                                       11
<PAGE>   12

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                                   (continued)

YEAR 2000 READINESS DISCLOSURE

Background

         In the past, many computer software programs were written utilizing two
digits rather than four in defining a year in the date field. As a result,
date-sensitive computer software and embedded technology may recognize the year
"00" in the date field as the year 1900 rather than 2000. This inability of
computer hardware, software, and other technology to distinguish between the
year 1900 and 2000 is generally referred to as the Year 2000 issue. If this
situation occurs, the potential exists for computer systems and equipment
failures or erroneous calculations by computer programs and embedded technology
in the year 2000.

Approach

         The Company has established a Year 2000 oversight committee comprised
of certain senior officers and internal audit personnel to develop a
comprehensive approach with regard to the Company's assessment and mitigation of
the Year 2000 issue. To date, this approach has included the establishment of a
Year 2000 task force comprised principally of various information technology
personnel under the direction of the Company's Information Technology Vice
President. The task force has been meeting on a regularly scheduled basis to
assess the Company's readiness with regard to the Year 2000 issue. The task
force has divided the Year 2000 project into three main sections: "IT Systems",
which encompasses the Company's hardware and software (operating and
application); "Non-IT Systems", which encompasses embedded technology and micro
processors contained in telecommunications and facilities management systems and
other equipment; and "Third Parties", which encompasses the Company's major
vendors, suppliers and customers.

The general phases to the task force's approach are:

         Phase 1           Inventorying Year 2000 items;

         Phase 2           Prioritizing identified items;

         Phase 3           Assessing the Year 2000 Compliance of the items
                           determined to be material to the Company;

         Phase 4           Creating a project plan to address material items
                           that are determined not to be Year 2000 compliant;

         Phase 5           Executing the project plan, which includes
                           repairing, replacing or upgrading of such items;

         Phase 6           Testing the material items.

Status

         With respect to the "IT Systems" and "Non-IT Systems" sections, Phases
1 - 4 have been completed and Phase 5 is currently in process. The Company
expects to have substantially all "IT Systems" and "Non-IT Systems" Year 2000
issues mitigated by March 31, 1999. With respect to the "Third Parties" section,
the Company is in the process of identifying and prioritizing its critical
vendors, suppliers and customers and communicating with them about their plans
in addressing the Year 2000 problem. Evaluations of certain of the most critical
vendors have already started and the "Third Party" section is expected to be
completed by June 30, 1999.


                                       12
<PAGE>   13

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                                   (continued)

Costs

         The total cost associated with required modifications to become Year
2000 compliant is not expected to have a material effect on the Company's
operations or financial condition. The estimated total cost to the Company of
the Year 2000 project is approximately $200,000. The total amount expended on
the project through September 30, 1998 was approximately $85,000, which related
primarily to the "IT Systems" and "Non-IT Systems" section. This amount came
from the Company's operating funds.

         The estimated cost of the Company's Year 2000 efforts and the dates on
which the Company believes it will complete the various phases referred to above
are based on management's best estimates using various assumptions regarding
future events, including the continued availability of certain resources,
third-party remediation plans and other matters. There can be no assurance that
these estimates will prove to be accurate, and actual results could differ from
those currently anticipated. Specific factors that could cause such differences
include the availability and costs of personnel trained in Year 2000 issues, the
ability to identify, assess, remediate and test all relevant computer codes and
embedded technology, the risk that reasonable testing will not uncover all Year
2000 problems and similar uncertainties.

Risk Factors

         The Company utilizes computer systems in virtually all aspects of its
business. The Company also maintains relationships with a number of vendors,
suppliers and customers whose own state of readiness with regard to the Year
2000 issue could potentially impact the Company. These parties include software,
hardware, and telecommunication providers, banks and investment brokers,
reinsurers and reinsurance intermediaries, certain agents and utilities. The
failure to correct a material Year 2000 issue by the Company or a material
"Third Party" could materially and adversely impact the Company's statement of
operations, liquidity and financial position. Due to the uncertainty inherent in
the Year 2000 issue, the Company is unable to determine whether the consequences
of Year 2000 failures will have a material impact on the Company's statement of
operations, liquidity or financial position. However, the Company believes with
its completion of its Year 2000 project significant interruptions of operations
should be reduced.

         Additionally, the Company issues professional liability, including
Directors & Officers liability, and commercial multi-peril insurance policies.
Coverage under certain of these policies may cover losses suffered by insureds
as a result of Year 2000 issues. The Company's professional liability policies
are written on a "claim made and reported" basis and since early 1997
approximately 50% of such policies have included a Year 2000 exclusion
endorsement. The Company is including a Year 2000 exclusion endorsement on all
new or renewing professional liability policies providing coverage effective
January 1, 1999 and thereafter. With respect to its commercial multi-peril
policies the Company believes claims against the comprehensive general liability
coverage under these policies should fail based upon the doctrine of fortuity.

         However, it is not possible to predict whether or to what extent
coverage could ultimately be found to exist by the courts and the effect thereof
on the Company. Additionally, the Company could incur expense to contest the
assertion of Year 2000 coverage claims, even if the Company prevails in its
position. As a result, it is impossible to predict what, if any, exposure
insurance companies may ultimately have for Year 2000 claims whether coverage
for the issue is specifically excluded or included.

Contingency Plans

         The Company has not established contingency plans for non-compliance of
its "IT Systems" or "Non-IT Systems", or those of "Third Parties". The Company
anticipates that the "IT Systems" and "Non-IT Systems" sections will be Year
2000 compliant by March 31, 1999, and a review of the "Third Parties" section
will be completed by June 30, 1999. Presently, the Company is not aware of any
major "Third Party" problem and is on schedule with its expected completion
dates for all sections. To the extent that the Company is aware of a
non-compliant material "Third Party" a contingency plan would be developed which
would potentially include replacing non-compliant material "Third Party" vendors
and suppliers.


                                       13
<PAGE>   14

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                                   (continued)

         Certain information included in this report and other statements or
materials published or to be published by the Company are not historical facts
but are forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new and
existing products, expectations for market segment and growth, the impact of
Year 2000 issues and similar matters. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
provides the following cautionary remarks regarding important factors which,
among others, could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development, results of the Company's
business and the other matters referred to above include, but are not limited
to: (i) changes in the business environment in which the Company operates,
including inflation and interest rates; (ii) changes in taxes, governmental laws
and regulations; (iii) competitive product and pricing activity; (iv)
difficulties of managing growth profitably; and (v) the impact of Year 2000
issues, including the matters referred to above under "Risk Factors".


                                       14
<PAGE>   15

            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities

         None.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

Item 5.  Other information

         None.

Item 6.  Exhibits and Reports on Form 8-K

         a.       Exhibits

                  Exhibit No.           Page No.              Description

                  11.0                      17                Computation of
                                                              Earnings Per Share

         b.       The Company has not filed any reports on Form 8-K during the
                  quarter for which this report is filed.


                                       15
<PAGE>   16

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                     PHILADELPHIA CONSOLIDATED HOLDING CORP.
                                     Registrant


Date November 13, 1998               /s/ James J. Maguire
-------------------------------      -------------------------------------------
                                     James J. Maguire
                                     Chairman of the Board of Directors,
                                     President and Chief Executive Officer
                                     (Principal Executive Officer)

Date November 13, 1998               /s/ Craig P. Keller
-------------------------------      -------------------------------------------
                                     Craig P. Keller
                                     Vice President, Secretary, Treasurer and
                                     Chief Financial Officer (Principal
                                     Financial and Accounting Officer)


                                       16