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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 March 31, 2003

Commission File Number 0-22280

PHILADELPHIA CONSOLIDATED HOLDING CORP.




(Exact name of registrant as specified in its charter)


|                                      |  |                                             
|------------------------------------- |  | --------------------------------------------
|PENNSYLVANIA
(State of Incorporation) |  | 23-2202671
(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:   o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES:   x   NO:   o

Indicate the number of shares outstanding of each of the issuers classes of
common stock as of May 9, 2003.

Preferred Stock, $.01 par value, no shares outstanding
Common Stock, no par value, 21,868,046 shares outstanding





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TABLE OF CONTENTS



|                                      |                                                                                               |                                                                |  |  |  |  |  | 
|------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|                                      |                                                                                               | CONSOLIDATED BALANCE SHEETS                                   
|                                      |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|                                      |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY    
|                                      |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                         
|                                      |                                                                                               | Notes to Consolidated Financial Statements                    
|                                      | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                      | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                      | Item 4. Controls and Procedures                                                              
|PART II - OTHER INFORMATION          
|SIGNATURES                           
|CERTIFICATION                        
|CERTIFICATION                        
|CERTIFICATION OF THE COMPANY'S C.E.O.
|CERTIFICATION OF THE COMPANY'S C.F.O.



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PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
INDEX

For the Quarterly Period Ended March 31, 2003

|                                                                                                                 |         |                                                                                                                                         |    |  |       | 
|---------------------------------------------------------------------------------------------------------------- | ------- | --------------------------------------------------------------------------------------------------------------------------------------- | -- |  | ----- | 
|Part I - Financial Information                                                                                   |         |                                                                                                                                         |    | 
|                                                                                                                 | Item 1. | Financial Statements:                                                                                                                   |    |  |      
|                                                                                                                 |         | Consolidated Balance Sheets - March 31, 2003 and
December 31, 2002                                                                      |    |  | 3     | 
|                                                                                                                 |         | Consolidated Statements of Operations and Comprehensive
Income - For the three months ended March 31, 2003 and 2002                     |    |  | 4     | 
|                                                                                                                 |         | Consolidated Statements of Changes in Shareholders Equity - For
the three months ended March 31, 2003 and year ended
December 31, 2002 |    |  | 5     | 
|                                                                                                                 |         | Consolidated Statements of Cash Flows - For the three
months ended March 31, 2003 and 2002                                              |    |  | 6     | 
|                                                                                                                 |         | Notes to Consolidated Financial Statements                                                                                              |    |  | 7-10  | 
|                                                                                                                 | Item 2. | Managements Discussion and Analysis of Financial Condition
and Results of Operations                                                   |    |  | 11-17 | 
|                                                                                                                 | Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                                                              |    |  | 18    | 
|                                                                                                                 | Item 4. | Controls and Procedures                                                                                                                 |    |  | 19    | 
|Part II - Other Information                                                                                      |         |                                                                                                                                         | 20 | 
|Signatures                                                                                                       |         |                                                                                                                                         | 21 | 
|Certification of the Companys Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |         |                                                                                                                                         | 22 | 
|Certification of the Companys Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |         |                                                                                                                                         | 23 | 

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PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

|                                     |                                                                                                                    |  |                                            |         |   |             |   |              |   |           |  | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------ | ------- | - | ----------- | - | ------------ | - | --------- |  | 
|                                     |                                                                                                                    |  |                                            |         |   | As of      
|                                     |                                                                                                                    |  |                                            |         |   |            
|                                     |                                                                                                                    |  |                                            |         |   | March 31,   |   |             
|                                     |                                                                                                                    |  |                                            |         |   | 2003        |   | December 31,
|                                     |                                                                                                                    |  |                                            |         |   | (Unaudited) |   | 2002        
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|ASSETS                               |                                                                                                                    |  |                                            |         |   |             |   |             
|INVESTMENTS:                         |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     | FIXED MATURITIES AVAILABLE FOR SALE AT MARKET
(AMORTIZED COST $933,319 AND $832,701)                               |  | $                                          | 950,835 |   |             | $ | 854,513      |  
|                                     | EQUITY SECURITIES AT MARKET (COST $49,154
AND $51,257)                                                             |  |                                            | 51,607  |   |             |   | 54,346       |  
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     |                                                                                                                    |  | TOTAL INVESTMENTS                          |         |   | 1,002,442   |   |              |   | 908,859   | 
|                                     | CASH AND CASH EQUIVALENTS                                                                                          |  |                                            | 38,084  |   |             |   | 42,002       |  
|                                     | ACCRUED INVESTMENT INCOME                                                                                          |  |                                            | 9,673   |   |             |   | 8,571        |  
|                                     | PREMIUMS RECEIVABLE                                                                                                |  |                                            | 130,297 |   |             |   | 130,007      |  
|                                     | PREPAID REINSURANCE PREMIUMS AND REINSURANCE
RECEIVABLES                                                           |  |                                            | 151,029 |   |             |   | 151,352      |  
|                                     | DEFERRED INCOME TAXES                                                                                              |  |                                            | 11,023  |   |             |   | 7,541        |  
|                                     | DEFERRED ACQUISITION COSTS                                                                                         |  |                                            | 63,046  |   |             |   | 61,272       |  
|                                     | PROPERTY AND EQUIPMENT, NET                                                                                        |  |                                            | 13,150  |   |             |   | 12,794       |  
|                                     | GOODWILL                                                                                                           |  |                                            | 25,724  |   |             |   | 25,724       |  
|                                     | OTHER ASSETS                                                                                                       |  |                                            | 14,335  |   |             |   | 10,212       |  
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     |                                                                                                                    |  | TOTAL ASSETS                               |         | $ | 1,458,803   |   |              | $ | 1,358,334 | 
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                                    |  |                                            |         |   |             |   |             
|POLICY LIABILITIES AND ACCRUALS:     |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     | UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES                                                                           |  | $                                          | 487,195 |   |             | $ | 445,548      |  
|                                     | UNEARNED PREMIUMS                                                                                                  |  |                                            | 326,390 |   |             |   | 306,093      |  
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     |                                                                                                                    |  | TOTAL POLICY LIABILITIES AND ACCRUALS      |         |   | 813,585     |   |              |   | 751,641   | 
|                                     | LOANS PAYABLE                                                                                                      |  |                                            | 49,317  |   |             |   | 39,113       |  
|                                     | PREMIUMS PAYABLE                                                                                                   |  |                                            | 29,850  |   |             |   | 33,553       |  
|                                     | PAYABLE FOR SECURITY PURCHASES                                                                                     |  |                                            | 11,481  |   |             |   | 6,100        |  
|                                     | OTHER LIABILITIES                                                                                                  |  |                                            | 66,604  |   |             |   | 50,104       |  
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     |                                                                                                                    |  | TOTAL LIABILITIES                          |         |   | 970,837     |   |              |   | 880,511   | 
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|COMMITMENTS AND CONTINGENCIES        |                                                                                                                    |  |                                            |         |   |             |   |             
|SHAREHOLDERS EQUITY:                |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     | PREFERRED STOCK, $.01 PAR VALUE,
10,000,000 SHARES AUTHORIZED,
NONE ISSUED AND OUTSTANDING                         |  |                                            |        |   |             |   |             |  
|                                     | COMMON STOCK, NO PAR VALUE,
100,000,000 SHARES AUTHORIZED, 21,866,961 AND
21,868,877 SHARES ISSUED AND OUTSTANDING |  |                                            | 276,905 |   |             |   | 276,945      |  
|                                     | NOTES RECEIVABLE FROM SHAREHOLDERS                                                                                 |  |                                            | (5,952  | ) |             |   | (6,407       | )
|                                     | ACCUMULATED OTHER COMPREHENSIVE INCOME                                                                             |  |                                            | 12,980  |   |             |   | 16,185       |  
|                                     | RETAINED EARNINGS                                                                                                  |  |                                            | 204,333 |   |             |   | 191,100      |  
|                                     | LESS COST OF COMMON STOCK HELD IN
TREASURY, 10,000 SHARES                                                          |  |                                            | (300    | ) |             |   |             |  
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     |                                                                                                                    |  | TOTAL SHAREHOLDERS EQUITY                 |         |   | 487,966     |   |              |   | 477,823   | 
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             
|                                     |                                                                                                                    |  | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |         | $ | 1,458,803   |   |              | $ | 1,358,334 | 
|                                     |                                                                                                                    |  |                                            |         |   |             |   |             

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

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PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES




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

|                                                          |                                                   |                           |            |                      |         |      |            |         |        | 
|--------------------------------------------------------- | ------------------------------------------------- | ------------------------- | ---------- | -------------------- | ------- | ---- | ---------- | ------- | ------ | 
|                                                          |                                                   |                           |            | For the Three Months
|                                                          |                                                   |                           |            | Ended March 31,     
|                                                          |                                                   |                           |            |                     
|                                                          |                                                   |                           |            | 2003                 |         | 2002
|                                                          |                                                   |                           |            |                      |         |     
|REVENUE:                                                  |                                                   |                           |            |                      |         |      |            |        
|                                                          | NET EARNED PREMIUMS                               |                           | $          | 148,362              |         |      | $          | 89,244  |       
|                                                          | NET INVESTMENT INCOME                             |                           |            | 9,805                |         |      |            | 8,855   |       
|                                                          | NET REALIZED INVESTMENT GAIN (LOSS)               |                           |            | (1,133               | )       |      |            | 47      |       
|                                                          | OTHER INCOME                                      |                           |            | 661                  |         |      |            | 1       |       
|                                                          |                                                   |                           |            |                      |         |      |            |        
|                                                          |                                                   | TOTAL REVENUE             |            |                      | 157,695 |      |            |         | 98,147 | 
|                                                          |                                                   |                           |            |                      |         |      |            |        
|LOSSES AND EXPENSES:                                      |                                                   |                           |            |                      |         |      |            |        
|                                                          | LOSS AND LOSS ADJUSTMENT EXPENSES                 |                           |            | 103,085              |         |      |            | 65,611  |       
|                                                          | NET REINSURANCE RECOVERIES                        |                           |            | (12,725              | )       |      |            | (12,562 | )     
|                                                          |                                                   |                           |            |                      |         |      |            |        
|                                                          | NET LOSS AND LOSS ADJUSTMENT EXPENSES             |                           |            | 90,360               |         |      |            | 53,049  |       
|                                                          | ACQUISITION COSTS AND OTHER UNDERWRITING
EXPENSES |                           |            | 46,420               |         |      |            | 27,821  |       
|                                                          | OTHER OPERATING EXPENSES                          |                           |            | 1,674                |         |      |            | 1,484   |       
|                                                          |                                                   |                           |            |                      |         |      |            |        
|                                                          |                                                   | TOTAL LOSSES AND EXPENSES |            |                      | 138,454 |      |            |         | 82,354 | 
|                                                          |                                                   |                           |            |                      |         |      |            |        
|INCOME BEFORE INCOME TAXES                                |                                                   |                           | 19,241     |                      |         |      | 15,793     |        
|                                                          |                                                   |                           |            |                      |         |      |            |        
|INCOME TAX EXPENSE (BENEFIT):                             |                                                   |                           |            |                      |         |      |            |        
|                                                          | CURRENT                                           |                           |            | 7,764                |         |      |            | 6,571   |       
|                                                          | DEFERRED                                          |                           |            | (1,756               | )       |      |            | (1,455  | )     
|                                                          |                                                   |                           |            |                      |         |      |            |        
|                                                          |                                                   | TOTAL INCOME TAX EXPENSE  |            |                      | 6,008   |      |            |         | 5,116  | 
|                                                          |                                                   |                           |            |                      |         |      |            |        
|                                                          |                                                   | NET INCOME                |            | $                    | 13,233  |      |            | $       | 10,677 | 
|                                                          |                                                   |                           |            |                      |         |      |            |        
|OTHER COMPREHENSIVE LOSS, NET OF TAX:                     |                                                   |                           |            |                      |         |      |            |        
|                                                          | HOLDING LOSS ARISING DURING PERIOD                |                           | $          | (3,941               | )       |      | $          | (4,059  | )     
|                                                          | RECLASSIFICATION ADJUSTMENT                       |                           |            | 736                  |         |      |            | (31     | )     
|                                                          |                                                   |                           |            |                      |         |      |            |        
|                                                          | OTHER COMPREHENSIVE LOSS                          |                           |            | (3,205               | )       |      |            | (4,090  | )     
|                                                          |                                                   |                           |            |                      |         |      |            |        
|COMPREHENSIVE INCOME                                      |                                                   | $                         | 10,028     |                      |         | $    | 6,587      |        
|                                                          |                                                   |                           |            |                      |         |      |            |        
|PER AVERAGE SHARE DATA:                                   |                                                   |                           |            |                      |         |      |            |        
|                                                          | BASIC EARNINGS PER SHARE                          |                           | $          | 0.61                 |         |      | $          | 0.50    |       
|                                                          |                                                   |                           |            |                      |         |      |            |        
|                                                          | DILUTED EARNINGS PER SHARE                        |                           | $          | 0.59                 |         |      | $          | 0.48    |       
|                                                          |                                                   |                           |            |                      |         |      |            |        
|WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING                |                                                   |                           | 21,865,269 |                      |         |      | 21,528,091 |        
|WEIGHTED-AVERAGE SHARE EQUIVALENTS
OUTSTANDING            |                                                   |                           | 562,552    |                      |         |      | 724,311    |        
|                                                          |                                                   |                           |            |                      |         |      |            |        
|WEIGHTED-AVERAGE SHARES AND SHARE
EQUIVALENTS OUTSTANDING |                                                   |                           | 22,427,821 |                      |         |      | 22,252,402 |        
|                                                          |                                                   |                           |            |                      |         |      |            |        

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

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PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES




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

|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |            |       |            |  
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------- | -------------------------- | ---------- | -------------- | ---------- | ------------------ | ---------- | ----- | ---------- | -
|                                                                      |                                                                                 |                                                 |                            |            | For the Three  |            |                    |            |      
|                                                                      |                                                                                 |                                                 |                            |            | Months Ended   |            | For the Year Ended
|                                                                      |                                                                                 |                                                 |                            |            | March 31, 2003 |            | December 31,      
|                                                                      |                                                                                 |                                                 |                            |            | (Unaudited)    |            | 2002              
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                   
|COMMON SHARES:                                                        |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      | BALANCE AT BEGINNING OF YEAR                                                    |                                                 |                            | 21,868,877 |                |            |                    | 21,509,723 |      
|                                                                      | EXERCISE OF EMPLOYEE STOCK OPTIONS                                              |                                                 |                            |           |                |            |                    | 107,000    |      
|                                                                      | ISSUANCE (FORFEITURES) OF SHARES PURSUANT TO STOCK
PURCHASE PLANS, NET          |                                                 |                            | (1,916     | )              |            |                    | 252,154    |      
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | BALANCE AT END OF PERIOD   |            |                | 21,866,961 |                    |            |       | 21,868,877 |  
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|TREASURY SHARES:                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      | BALANCE AT BEGINNING OF YEAR                                                    |                                                 |                            |           |                |            |                    |           |      
|                                                                      | ISSUANCE OF SHARES PURSUANT TO STOCK PURCHASE PLANS,
NET                        |                                                 |                            |           |                |            |                    | (75,000    | )    
|                                                                      | SHARES REPURCHASED PURSUANT TO AUTHORIZATION                                    |                                                 |                            | 10,000     |                |            |                    | 75,000     |      
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | BALANCE AT END OF PERIOD   |            |                | 10,000     |                    |            |       |           |  
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|COMMON STOCK:                                                         |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      | BALANCE AT BEGINNING OF YEAR                                                    |                                                 | $                          | 276,945    |                |            | $                  | 268,509    |      
|                                                                      | EXERCISE OF EMPLOYEE STOCK OPTIONS                                              |                                                 |                            |           |                |            |                    | 2,115      |      
|                                                                      | ISSUANCE (FORFEITURES) OF SHARES PURSUANT TO STOCK
PURCHASE PLANS               |                                                 |                            | (40        | )              |            |                    | 6,321      |      
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | BALANCE AT END OF PERIOD   |            |                | 276,905    |                    |            |       | 276,945    |  
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|NOTES RECEIVABLE FROM SHAREHOLDERS:                                   |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      | BALANCE AT BEGINNING OF YEAR                                                    |                                                 |                            | (6,407     | )              |            |                    | (3,373     | )    
|                                                                      | NOTES RECEIVABLE ISSUED (FORFEITURES) PURSUANT TO
EMPLOYEE STOCK PURCHASE PLANS |                                                 |                            | 59         |                |            |                    | (4,017     | )    
|                                                                      | COLLECTION OF NOTES RECEIVABLE                                                  |                                                 |                            | 396        |                |            |                    | 983        |      
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | BALANCE AT END OF PERIOD   |            |                | (5,952     | )                  |            |       | (6,407     | )
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|ACCUMULATED OTHER COMPREHENSIVE INCOME,
NET OF DEFERRED INCOME TAXES: |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 | BALANCE AT BEGINNING OF YEAR                    |                            |            | 16,185         |            |                    |            | 8,461 |           
|                                                                      |                                                                                 | OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES |                            |            | (3,205         | )          |                    |            | 7,724 |           
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | BALANCE AT END OF PERIOD   |            |                | 12,980     |                    |            |       | 16,185     |  
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|RETAINED EARNINGS:                                                    |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      | BALANCE AT BEGINNING OF YEAR                                                    |                                                 |                            | 191,100    |                |            |                    | 155,095    |      
|                                                                      | NET INCOME                                                                      |                                                 |                            | 13,233     |                |            |                    | 36,005     |      
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | BALANCE AT END OF PERIOD   |            |                | 204,333    |                    |            |       | 191,100    |  
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|COMMON STOCK HELD IN TREASURY:                                        |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      | BALANCE AT BEGINNING OF YEAR                                                    |                                                 |                            |           |                |            |                    |           |      
|                                                                      | COMMON SHARES REPURCHASED                                                       |                                                 |                            | (300       | )              |            |                    | (2,023     | )    
|                                                                      | ISSUANCE OF SHARES PURSUANT TO STOCK PURCHASE PLANS                             |                                                 |                            |           |                |            |                    | 2,023      |      
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | BALANCE AT END OF PERIOD   |            |                | (300       | )                  |            |       |           |  
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           
|                                                                      |                                                                                 |                                                 | TOTAL SHAREHOLDERS EQUITY |            | $              | 487,966    |                    |            | $     | 477,823    |  
|                                                                      |                                                                                 |                                                 |                            |            |                |            |                    |           

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

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PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES




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

|                                               |                                                                                                            |                                           |        |                                      |         |      |        |         |         |  
|---------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------ | ------------------------------------ | ------- | ---- | ------ | ------- | ------- | -
|                                               |                                                                                                            |                                           |        | For the Three Months Ended March 31,
|                                               |                                                                                                            |                                           |        |                                     
|                                               |                                                                                                            |                                           |        | 2003                                 |         | 2002
|                                               |                                                                                                            |                                           |        |                                      |         |     
|CASH FLOWS FROM OPERATING ACTIVITIES:          |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               | NET INCOME                                                                                                 |                                           | $      | 13,233                               |         |      | $      | 10,677  |        
|                                               | ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:                          |                                           |        |                                      |         |      |        |         |        
|                                               | NET REALIZED INVESTMENT (GAIN) LOSS                                                                        |                                           |        | 1,133                                |         |      |        | (47     | )      
|                                               | DEPRECIATION AND AMORTIZATION EXPENSE                                                                      |                                           |        | 1,724                                |         |      |        | 196     |        
|                                               | DEFERRED INCOME TAX BENEFIT                                                                                |                                           |        | (1,756                               | )       |      |        | (1,455  | )      
|                                               | CHANGE IN PREMIUMS RECEIVABLE                                                                              |                                           |        | (290                                 | )       |      |        | 5,349   |        
|                                               | CHANGE IN OTHER RECEIVABLES                                                                                |                                           |        | (779                                 | )       |      |        | (1,355  | )      
|                                               | CHANGE IN DEFERRED ACQUISITION COSTS                                                                       |                                           |        | (1,774                               | )       |      |        | (2,414  | )      
|                                               | CHANGE IN INCOME TAXES PAYABLE                                                                             |                                           |        | 5,450                                |         |      |        | 3,719   |        
|                                               | CHANGE IN OTHER ASSETS                                                                                     |                                           |        | (4,256                               | )       |      |        | 494     |        
|                                               | CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT
EXPENSES                                                         |                                           |        | 41,647                               |         |      |        | 21,851  |        
|                                               | CHANGE IN UNEARNED PREMIUMS                                                                                |                                           |        | 20,297                               |         |      |        | 17,334  |        
|                                               | CHANGE IN OTHER LIABILITIES                                                                                |                                           |        | 7,347                                |         |      |        | (753    | )      
|                                               | TAX BENEFIT FROM EXERCISE OF EMPLOYEE
STOCK OPTIONS                                                        |                                           |        |                                     |         |      |        | 573     |        
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               |                                                                                                            | NET CASH PROVIDED BY OPERATING ACTIVITIES |        |                                      | 81,976  |      |        |         | 54,169  |  
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|CASH FLOWS FROM INVESTING ACTIVITIES:          |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               | PROCEEDS FROM SALES OF INVESTMENTS IN FIXED
MATURITIES                                                     |                                           |        | 6,504                                |         |      |        | 13,941  |        
|                                               | PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED
MATURITIES                                                  |                                           |        | 47,509                               |         |      |        | 26,807  |        
|                                               | PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY
SECURITIES                                                    |                                           |        | 3,053                                |         |      |        | 253     |        
|                                               | COST OF FIXED MATURITIES ACQUIRED                                                                          |                                           |        | (150,325                             | )       |      |        | (77,492 | )      
|                                               | COST OF EQUITY SECURITIES ACQUIRED                                                                         |                                           |        | (1,850                               | )       |      |        | (17,955 | )      
|                                               | PURCHASE OF PROPERTY AND EQUIPMENT, NET                                                                    |                                           |        | (1,104                               | )       |      |        | (769    | )      
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               |                                                                                                            | NET CASH USED FOR INVESTING ACTIVITIES    |        |                                      | (96,213 | )    |        |         | (55,215 | )
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|CASH FLOWS FROM FINANCING ACTIVITIES:          |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               | PROCEEDS FROM LOANS PAYABLE                                                                                |                                           |        | 15,161                               |         |      |        |        |        
|                                               | REPAYMENTS ON LOANS PAYABLE                                                                                |                                           |        | (4,957                               | )       |      |        |        |        
|                                               | PROCEEDS FROM EXERCISE OF EMPLOYEE STOCK OPTIONS                                                           |                                           |        |                                     |         |      |        | 410     |        
|                                               | PROCEEDS FROM SHARES ISSUED PURSUANT TO
STOCK PURCHASE PLANS                                               |                                           |        | 19                                   |         |      |        | 10      |        
|                                               | PROCEEDS FROM COLLECTION OF NOTES RECEIVABLE                                                               |                                           |        | 396                                  |         |      |        | 230     |        
|                                               | COST OF COMMON STOCK REPURCHASED                                                                           |                                           |        | (300                                 | )       |      |        |        |        
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               |                                                                                                            | NET CASH PROVIDED BY FINANCING ACTIVITIES |        |                                      | 10,319  |      |        |         | 650     |  
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|NET DECREASE IN CASH AND CASH EQUIVALENTS      |                                                                                                            |                                           | (3,918 | )                                    |         |      | (396   | )      
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |                                                                                                            |                                           | 42,002 |                                      |         |      | 49,910 |        
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|CASH AND CASH EQUIVALENTS AT END OF PERIOD     |                                                                                                            | $                                         | 38,084 |                                      |         | $    | 49,514 |        
|                                               |                                                                                                            |                                           |        |                                      |         |      |        |        
|CASH PAID DURING THE PERIOD FOR:               |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               | INCOME TAXES                                                                                               |                                           | $      | 1,930                                |         |      | $      | 2,200   |        
|                                               | INTEREST                                                                                                   |                                           | $      | 134                                  |         |      | $      | 129     |        
|NON-CASH TRANSACTIONS:                         |                                                                                                            |                                           |        |                                      |         |      |        |        
|                                               | ISSUANCE (FORFEITURES) OF SHARES PURSUANT TO
EMPLOYEE STOCK PURCHASE PLAN IN EXCHANGE FOR
NOTES RECEIVABLE |                                           | $      | (59                                  | )       |      | $      | (31     | )      

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

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##### Table of Contents






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 three months ended
March 31, 2003 and 2002 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 only normal
recurring accruals, necessary for a fair statement of the information set
forth therein. The results of operations for the three months ended March
31, 2003 are not necessarily indicative of the operating results to be
expected for the full year or any other period.                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | These financial statements should be read in conjunction with the financial
statements and notes included in the Companys Annual Report on Form 10-K as
of and for the year ended December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|2. |  | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | The carrying amounts for the Companys investments approximates their
estimated fair value. The Company measures the fair value of investments
based upon quoted market prices or by obtaining quotes from dealers. At
March 31, 2003, the Company held no derivative financial instruments or
embedded financial derivatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | 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 for securities, except interests in securitized assets, meeting
predetermined thresholds 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.
Realized losses recorded for the three months ended March 31, 2003 and 2002
were $0.9 million and $0 million, respectively as a result of the Companys
other than temporary impairment evaluation.                                                                                                        
|  
|   |  | The Companys impairment evaluation and recognition for interests in
securitized assets is conducted in accordance with the guidance provided by
the Emerging Issues Task Force of the Financial Accounting Standards Board.
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, calculated as 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. Realized losses recorded for the three months ended March
31, 2003 and 2002 were $0.6 million and $0 million, respectively, as a
result of the Companys impairment evaluation for investments in securitized
assets.
|  
|3. |  | Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | The carrying amount of goodwill is subject to an annual impairment test to
identify potential goodwill impairment and measure the amount of a goodwill
impairment loss to be recognized (if any). As a result of the impairment
analysis, no change in the carrying amount of goodwill was recorded by the
Company for the year ended December 31, 2002. No events have occurred or
circumstances arisen subsequent to December 31, 2002 that would necessitate
the Company to perform an interim impairment test. Consequently no change
in the carrying amount of goodwill has been recorded for the three months
ended March 31, 2003.                                                                                                                                                                                                                                                                                                                                                         
|  
|4. |  | Liability for Unpaid Loss and Loss Adjustment Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | The liability for unpaid loss and loss adjustment expenses reflects the
Companys best estimate for future amounts needed to pay losses and related
settlement expenses with respect to insured events. Estimating the ultimate
claims liability is necessarily a complex and judgmental process, inasmuch
as the amounts are based on managements informed estimates and judgments
using data currently available. In some cases significant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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|   |  | 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. As additional experience and data become available the
Companys estimate for the liability for unpaid loss and loss adjustment
expenses is revised accordingly. If the Companys ultimate losses, net of
reinsurance, prove to differ substantially from the amounts recorded at
March 31, 2003, the related adjustments could have a material adverse impact
on the Companys financial condition, and results of operations.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | Loans Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | As of March 31, 2003, the Company had aggregate borrowings of $49.3 million
from the Federal Home Loan Bank. These borrowings bear interest at adjusted
LIBOR and mature twelve months from inception. The proceeds from these
borrowings are invested in collateralized mortgage obligation and asset
backed securities to achieve a positive spread between the rate of interest
on these securities and the borrowing rates.                                                                                                                                                                                                                                                                                                                                                                                             
|  
|6. |  | 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. Following is the computation of
earnings per share for the three months ended March 31, 2003 and 2002,
respectively (in thousands, except per share data):                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                                                          |  |                         |        |      |  |   |        | 
|--------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | - | ------ | 
|                                                          |  | As of and For the Three
|                                                          |  | Months Ended           
|                                                          |  | March 31,              
|                                                          |  |                        
|                                                          |  | 2003                    |        | 2002
|                                                          |  |                         |        |     
|Weighted-Average Common Shares Outstanding                |  |                         | 21,865 |      |  |   | 21,528 | 
|Weighted-Average Share Equivalents Outstanding            |  |                         | 563    |      |  |   | 724    | 
|                                                          |  |                         |        |      |  |   |        | 
|Weighted-Average Shares and Share
Equivalents Outstanding |  |                         | 22,428 |      |  |   | 22,252 | 
|                                                          |  |                         |        |      |  |   |        | 
|Net Income                                                |  | $                       | 13,233 |      |  | $ | 10,677 | 
|                                                          |  |                         |        |      |  |   |        | 
|Basic Earnings per Share                                  |  | $                       | 0.61   |      |  | $ | 0.50   | 
|                                                          |  |                         |        |      |  |   |        | 
|Diluted Earnings per Share                                |  | $                       | 0.59   |      |  | $ | 0.48   | 
|                                                          |  |                         |        |      |  |   |        | 



|7. |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The effective tax rate differs from the 35% marginal tax rate principally as
a result of tax-exempt interest income, the dividend received deduction and
other differences in the recognition of revenues and expenses for tax and
financial reporting purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|8. |  | Commitments and Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | The Company is a defendant in a lawsuit to which one of the Companys
insurance subsidiaries, Philadelphia Indemnity Insurance Company (PIIC),
issued insurance coverages to a policyholder for residual value protection.
The complaint asks for damages and a declaratory judgment against PIIC. The
complaint arises principally out of a loss adjustment change and also
relates to other coverage interpretations made by PIIC under the terms of
residual value protection insurance policies issued to the plaintiff. The
complaint alleges that as a result of the loss adjustment change the
plaintiff may suffer damages as much as $75 million. On June 27, 2002, PIIC
filed an answer to the complaint denying liability with respect to the
matters set forth above. PIIC believes that this claim is without merit and
is vigorously defending this action.
|  
|   |  | The Company is subject to routine legal proceedings in connection with its
property and casualty insurance business. The Company also is not involved
in any pending or threatened legal or administrative proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

8



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|    |  | which management believes can reasonably be expected to have a material
adverse effect on the Companys financial condition or results of
operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|9.  |  | 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 Losses arising during the three months ended
March 31, 2003 and 2002 was ($2.1) million and ($2.2) million, respectively.
The related tax effect of Reclassification Adjustments for the three months
ended March 31, 2003 and 2002 was $0.4 million and $0 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|10. |  | Segment Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | The Companys operations are classified into three reportable business
segments which are organized around its three underwriting divisions: 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. Each business segments
responsibilities include: pricing, managing the risk selection process, and
monitoring the loss ratios by product and insured. The reportable segments
operate solely within the United States and have not been aggregated.                  
|   
|    |  | 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 premium production and the associated loss experience which includes
paid losses, an amount determined on the basis of claim adjusters
evaluation with respect to insured events that have occurred and an amount
for losses incurred that have not been reported. Investments and investment
performance including investment income and net realized investment gain
(loss); acquisition costs and other underwriting expenses including
commissions, premium taxes and other acquisition costs; and other operating
expenses are managed at a corporate level by the corporate accounting
function in conjunction with other corporate departments and are included in
Corporate.
|   
|    |  | Following is a tabulation of business segment information for the three
months ended March 31, 2003 and 2002. Corporate information is included to
reconcile segment data to the consolidated financial statements (in
thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | 9Table of Contents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |         |         | 
|-------------------------- | ---------------------------- | ------------------------------------------------- | ------- | ---------- | ------ | --------- | ------ | -------- | ------ | --------- | ------- | ------ | ----- | - | --------- | ------ | ------ | - | --------- | ------- | ------- | 
|                           |                              |                                                   |         | Commercial |        | Specialty |        | Personal |        |           |         |        |       |   |           |       
|                           |                              |                                                   |         | Lines      |        | Lines     |        | Lines    |        | Corporate |         | Total 
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |       
|March 31, 2003:            |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Gross Written Premiums     |                              | $                                                 | 130,238 |            |        | $         | 38,046 |          |        | $         | 24,998  |        |       | $ |          |        |        | $ | 193,282   |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Net Written Premiums       |                              | $                                                 | 122,498 |            |        | $         | 35,172 |          |        | $         | 13,978  |        |       | $ |          |        |        | $ | 171,648   |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Revenue:                   |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           | Net Earned Premiums          |                                                   | $       | 109,674    |        |           | $      | 28,702   |        |           | $       | 9,986  |       |   | $         |       |        |   | $         | 148,362 |        
|                           | Net Investment Income        |                                                   |         |           |        |           |        |         |        |           |         |       |       |   |           | 9,805  |        |   |           | 9,805   |        
|                           | Net Realized Investment Loss |                                                   |         |           |        |           |        |         |        |           |         |       |       |   |           | (1,133 | )      |   |           | (1,133  | )      
|                           | Other Income                 |                                                   |         |           |        |           |        |         |        |           |         | 580    |       |   |           | 81     |        |   |           | 661     |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           | Total Revenue                |                                                   |         | 109,674    |        |           |        | 28,702   |        |           |         | 10,566 |       |   |           | 8,753  |        |   |           | 157,695 |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Losses and Expenses:       |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           |                              | Net Loss and Loss Adjustment Expenses             |         |            | 65,938 |           |        |          | 18,641 |           |         |        | 5,781 |   |           |        |       |   |           |         | 90,360  | 
|                           |                              | Acquisition Costs and Other Underwriting
Expenses |         |            |       |           |        |          |       |           |         |        |      |   |           |        | 46,420 |   |           |         | 46,420  | 
|                           |                              | Other Operating Expenses                          |         |            |       |           |        |          |       |           |         |        | 325   |   |           |        | 1,349  |   |           |         | 1,674   | 
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           |                              | Total Losses and Expenses                         |         |            | 65,938 |           |        |          | 18,641 |           |         |        | 6,106 |   |           |        | 47,769 |   |           |         | 138,454 | 
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Income Before Income Taxes |                              |                                                   | 43,736  |            |        |           | 10,061 |          |        |           | 4,460   |        |       |   | (39,016   | )      |        |   | 19,241    |        
|Total Income Tax Expense   |                              |                                                   |        |            |        |           |       |          |        |           |        |        |       |   | 6,008     |        |        |   | 6,008     |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Net Income                 |                              | $                                                 | 43,736  |            |        | $         | 10,061 |          |        | $         | 4,460   |        |       | $ | (45,024   | )      |        | $ | 13,233    |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Total Assets               |                              | $                                                 |        |            |        | $         |       |          |        | $         | 232,292 |        |       | $ | 1,226,511 |        |        | $ | 1,458,803 |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|March 31, 2002:            |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Gross Written Premiums     |                              | $                                                 | 90,559  |            |        | $         | 24,428 |          |        | $         | 21,480  |        |       | $ |          |        |        | $ | 136,467   |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Net Written Premiums       |                              | $                                                 | 74,863  |            |        | $         | 22,773 |          |        | $         | 11,864  |        |       | $ |          |        |        | $ | 109,500   |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Revenue:                   |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           | Net Earned Premiums          |                                                   | $       | 61,070     |        |           | $      | 18,935   |        |           | $       | 9,239  |       |   | $         |       |        |   | $         | 89,244  |        
|                           | Net Investment Income        |                                                   |         |           |        |           |        |         |        |           |         |       |       |   |           | 8,855  |        |   |           | 8,855   |        
|                           | Net Realized Investment Gain |                                                   |         |           |        |           |        |         |        |           |         |       |       |   |           | 47     |        |   |           | 47      |        
|                           | Other Income                 |                                                   |         |           |        |           |        |         |        |           |         | 570    |       |   |           | (569   | )      |   |           | 1       |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           | Total Revenue                |                                                   |         | 61,070     |        |           |        | 18,935   |        |           |         | 9,809  |       |   |           | 8,333  |        |   |           | 98,147  |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Losses and Expenses:       |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           |                              | Net Loss and Loss Adjustment Expenses             |         |            | 36,657 |           |        |          | 11,666 |           |         |        | 4,726 |   |           |        |       |   |           |         | 53,049  | 
|                           |                              | Acquisition Costs and Other Underwriting
Expenses |         |            |       |           |        |          |       |           |         |        |      |   |           |        | 27,821 |   |           |         | 27,821  | 
|                           |                              | Other Operating Expenses                          |         |            |       |           |        |          |       |           |         |        | 19    |   |           |        | 1,465  |   |           |         | 1,484   | 
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|                           |                              | Total Losses and Expenses                         |         |            | 36,657 |           |        |          | 11,666 |           |         |        | 4,745 |   |           |        | 29,286 |   |           |         | 82,354  | 
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Income Before Income Taxes |                              |                                                   | 24,413  |            |        |           | 7,269  |          |        |           | 5,064   |        |       |   | (20,953   | )      |        |   | 15,793    |        
|Total Income Tax Expense   |                              |                                                   |        |            |        |           |       |          |        |           |        |        |       |   | 5,116     |        |        |   | 5,116     |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Net Income                 |                              | $                                                 | 24,413  |            |        | $         | 7,269  |          |        | $         | 5,064   |        |       | $ | (26,069   | )      |        | $ | 10,677    |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        
|Total Assets               |                              | $                                                 |        |            |        | $         |       |          |        | $         | 174,093 |        |       | $ | 901,038   |        |        | $ | 1,075,131 |        
|                           |                              |                                                   |         |            |        |           |        |          |        |           |         |        |       |   |           |        |        |   |           |        

10



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##### Table of Contents






PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

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, but are not limited to:



| |  | Industry factors - Historically the financial performance of the
property and casualty insurance industry has tended to fluctuate in
cyclical patterns of soft markets followed by hard markets. 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 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 - Property and casualty insurance premiums are established
before the amount of losses and loss adjustment expenses, or the
extent to which inflation may affect 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.                                                                                                                                                                                                                                                                                                                                                                
| 
| |  | Claims development and the process of estimating loss reserves 
Estimating the Companys ultimate liability for unpaid loss and loss
adjustment expenses is necessarily a complex and judgmental process,
inasmuch as the amounts of any ultimate liability of the Company with
respect to such claims are based on managements informed estimates
and judgments using data currently available.                                                                                                                                                                                 
| 
| |  | Catastrophe Exposure  The Companys insurance subsidiaries issue
insurance policies which provide coverage for commercial and personal
property and casualty risks. It is possible that a catastrophic event
could greatly increase claims under the insurance policies the
insurance subsidiaries issue. Catastrophes may result from a variety
of events or conditions, including hurricanes, windstorms,
earthquakes, hail and other severe weather conditions and may include
terrorist events. It is possible that a catastrophic event could
adversely impact profitability.
| 
| |  | Reinsurance  The adequacy of reinsurance coverage which may be
obtained by the Company and the ability and willingness of the
Companys reinsurers to pay.                                                                                                                                                                                                                                                                                                                                                                                                                        

The above risk factors should be read in conjunction with the Certain Critical
Accounting Estimates and Judgments included in the Companys Annual Report on
Form 10-K For the Fiscal Year Ended December 31, 2002.

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 rating. The Company utilizes external independent
professional investment managers for its fixed maturity and equity investments.
These investments consist of diversified issuers and issues, and as of March
31, 2003, approximately 92.0% 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 90.2% and 5.6%,
respectively, at December 31, 2002.

11



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##### Table of Contents



PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

During 2003 the relative percentage investment in tax-exempt fixed maturity
securities versus taxable fixed maturity securities increased due to the
Company taking advantage of the more favorable after-tax yields. As of March
31, 2003, on a cost basis, investment grade tax-exempt fixed maturity
securities represented 31.3% of the total invested assets, compared to 30.3% as
December 31, 2002.

Collateralized mortgage and asset backed securities, on a cost basis, amounted
to $93.1 million and $301.3 million, respectively, as of March 31, 2003 and
$89.2 and $284.1, respectively, as of December 31 2002. The collateralized
mortgage and asset backed investments are shorter tranche securities possessing
favorable prepayment risk profiles.

The Company regularly 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 for all securities, except interests in securitized assets, meeting
predetermined thresholds, to determine whether such decline is other than
temporary. If the Company determines a decline in value to be other than
temporary, based upon its detailed review, or if a decline in value for an
equity investment has persisted continuously for nine months the cost basis of
the security is written down to its fair value. The factors considered in
reaching the conclusion that a decline below cost is other-than-temporary
include, but are not limited to, whether: the issuer is in financial distress;
the investment is secured; a significant credit rating action has occurred;
scheduled interest payments have been delayed or missed; or changes in laws
and/or regulations have impacted an issuer or industry. The amount of any
write down is included in earnings as a realized loss in the period the
impairment arose. This evaluation resulted in non-cash realized investment
losses of $0.9 million and $0 million for the three months ended March 31, 2003
and 2002, respectively. The $0.9 million in non-cash realized investment
losses resulted from other than temporary declines in the fair value of certain
holdings in the Companys common stock portfolio. The Company primarily
attributes these other than temporary declines in fair value to an uncertain
economic climate, the overhang of corporate governance issues, high profile
bankruptcies, and the recent war.

Additionally, the Company conducts its impairment evaluation and recognition
for interests in securitized assets in accordance with the guidance provided by
the Emerging Issues Task Force of the Financial Accounting Standards Board
(EITF). 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, calculated
as 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. This evaluation resulted in non-cash realized investment losses of $0.6
million and $0 million for the three months ended March 31, 2003 and 2002,
respectively. These non-cash realized investment losses were primarily due to
investments in collateralized bond obligations as a result of the current
historical highs in non investment grade default rates.

The Companys fixed maturity portfolio amounted to $950.8 million and $854.5
million, as of March 31, 2003 and December 31, 2002, respectively, of which
98.8% and 98.6% as of March 31, 2003 and December 31, 2002, respectively, of
the portfolio was comprised of investment grade securities. Since the fourth
quarter of 2001, U.S. investment grade securities have experienced varying
price and ratings volatility, having been affected by the uncertain economic
climate following the September 11, 2001 terrorist attacks, the corporate
governance issues following the Enron scandal and the subsequent stream of
corporate problems and high profile bankruptcies. While these circumstances
have the potential to impact investment grade securities, the high quality of
the Companys overall AA+ rated fixed maturity portfolio and the decline in
interest rates have mitigated potential volatility. The Company had fixed
maturity investments with unrealized losses amounting to $14.5 million and $9.2
million as of March 31, 2003 and December 31, 2002, respectively. Of this
amount, interests in securitized assets had unrealized losses amounting to
$11.8 million and $7.3 million as of March 31, 2003 and December 31, 2002,
respectively, and investments in aircraft collateralized Enhanced Equipment
Trust Certificates (EETCs) had unrealized losses amounting to $1.8 and $1.3
million as of March 31, 2003 and December 31, 2002, respectively. As discussed
above, the Companys impairment evaluation and recognition for interests in
securitized assets is conducted in accordance with the guidance provided by the
EITF. With respect to the EETCs, these investments are current on interest and
sinking fund payments, and are subjected to a quarterly impairment review which
includes performing a

12



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##### Table of Contents



PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

liquidation collateral analysis that incorporates various stress scenarios
impacting the securitys implied loan-to-value levels.

The following table identifies the period of time securities with an unrealized
loss at March 31, 2003 have continuously been in an unrealized loss position.
Included in the amounts displayed in the table are $9.0 million of unrealized
losses due to non-investment grade fixed maturity securities having a fair
value of $11.4 million. No issuer of securities or industry represents more
than 2.9% and 7.7%, respectively, of the total estimated fair value, or 23.6%
and 28.9%, respectively, of the total gross unrealized loss included in the
table below. As previously discussed, there are certain risks and
uncertainties inherent in the Companys impairment methodology. Should the
Company subsequently determine a decline in the fair value below the cost basis
to be other than temporary, the security would be written down to its fair
value and the difference would be included in earnings as a realized loss for
the period such determination was made.

|                                                                |  |                       |      |                    |  |                    |      |                   |  |                         |       |  |  |   |      |  |  |   |       | 
|--------------------------------------------------------------- |  | --------------------- | ---- | ------------------ |  | ------------------ | ---- | ----------------- |  | ----------------------- | ----- |  |  | - | ---- |  |  | - | ----- | 
|                                                                |  |                       |      |                    |  |                    |      |                   |  | Gross Unrealized Losses |       |  |  |   |      |  |  |  
|                                                                |  | (in millions)        
|                                                                |  |                      
|                                                                |  | Fixed Maturities      |      |                    |  |                    |      |                   |  |                         |       |  |  |   |      |  |  |  
|Continuous                                                      |  | Available for Sale    |      |                    |  |                    |      | Total             |  |                         |       |  |  |   |      | 
|time in unrealized                                              |  | Excluding Interests   |      | Interests in       |  | Fixed Maturities   |      |                   |  |                         |       |  |  |  
|loss position                                                   |  | in Securitized Assets |      | Securitized Assets |  | Available for Sale |      | Equity Securities |  | Total Investments      
|                                                                |  |                       |      |                    |  |                    |      |                   |  |                        
|0  3 months                                                    |  | $                     | 0.4  |                    |  | $                  | 0.7  |                   |  | $                       | 1.1   |  |  | $ | 0.5  |  |  | $ | 1.6   | 
|3  6 months                                                    |  |                       |     |                    |  |                    | 0.3  |                   |  |                         | 0.3   |  |  |   | 0.5  |  |  |   | 0.8   | 
|6  9 months                                                    |  |                       |     |                    |  |                    | 1.8  |                   |  |                         | 1.8   |  |  |   | 0.4  |  |  |   | 2.2   | 
|9  12 months                                                   |  |                       |     |                    |  |                    | 1.6  |                   |  |                         | 1.6   |  |  |   |     |  |  |   | 1.6   | 
|12  18 months                                                  |  |                       | 2.0  |                    |  |                    | 2.1  |                   |  |                         | 4.1   |  |  |   |     |  |  |   | 4.1   | 
|18  24 months                                                  |  |                       | 0.3  |                    |  |                    | 4.4  |                   |  |                         | 4.7   |  |  |   |     |  |  |   | 4.7   | 
|> 24 months                                                     |  |                       |     |                    |  |                    | 0.9  |                   |  |                         | 0.9   |  |  |   |     |  |  |   | 0.9   | 
|                                                                |  |                       |      |                    |  |                    |      |                   |  |                         |       |  |  |   |      |  |  |   |       | 
|Total Gross
Unrealized Losses                                   |  | $                     | 2.7  |                    |  | $                  | 11.8 |                   |  | $                       | 14.5  |  |  | $ | 1.4  |  |  | $ | 15.9  | 
|                                                                |  |                       |      |                    |  |                    |      |                   |  |                         |       |  |  |   |      |  |  |   |       | 
|Estimated fair
value of securities
with a gross
unrealized loss |  | $                     | 64.6 |                    |  | $                  | 89.6 |                   |  | $                       | 154.2 |  |  | $ | 16.6 |  |  | $ | 170.8 | 
|                                                                |  |                       |      |                    |  |                    |      |                   |  |                         |       |  |  |   |      |  |  |   |       | 

The following table presents certain information with respect to individual
securities with a significant unrealized loss position as of March 31, 2003.

|                                  |  |                                                 |  |                |     |                 |     |   |     |   |      | 
|--------------------------------- |  | ----------------------------------------------- |  | -------------- | --- | --------------- | --- | - | --- | - | ---- | 
|                                  |  | Significant Unrealized Losses by Security       |  |                |     |                 |     |   |     |  
|                                  |  |                                                 |  |                |     |                 |     |   |     |  
|                                  |  | (in millions)                                   |  |                |     |                 |     |   |     |  
|Issuer                            |  | Security Type                                   |  | Carrying Value |     | Unrealized Loss
|                                  |  |                                                 |  |                |     |                
|Continental Airlines 2000-1-C-2   |  | Fixed Maturity                                  |  | $              | 1.5 |                 |     | $ | 1.5 |  
|Continental Airlines              |  | Fixed Maturity                                  |  |                | 1.2 |                 |     |   | 0.3 |  
|Conseco Fin SEC Corp 2000-4ml     |  | Fixed Maturity  Interest in Securitized Assets |  |                | 1.0 |                 |     |   | 1.1 |  
|Conseco Fin SEC Corp SER 2000-4ml |  | Fixed Maturity  Interest in Securitized Assets |  |                | 0.4 |                 |     |   | 0.8 |  
|Greentree Financial Corp. 96-9 B2 |  | Fixed Maturity  Interest in Securitized Assets |  |                | 0.3 |                 |     |   | 0.6 |  
|Greentree Financial Corp. 99-2 B1 |  | Fixed Maturity  Interest in Securitized Assets |  |                | 0.8 |                 |     |   | 2.1 |  
|Metris Master Trust 2001-2 CLB    |  | Fixed Maturity  Interest in Securitized Assets |  |                | 1.2 |                 |     |   | 0.8 |  
|Nextcard CRCN MNT 2001-1 CLB144A  |  | Fixed Maturity  Interest in Securitized Assets |  |                | 1.2 |                 |     |   | 3.7 |  
|                                  |  |                                                 |  |                |     |                 |     |   |     |   |      | 
|                                  |  |                                                 |  |                |     | $               | 7.6 |   |     | $ | 10.9 | 
|                                  |  |                                                 |  |                |     |                 |     |   |     |   |      | 

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##### Table of Contents



PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

During the three months ended March 31, 2003 the Companys gross loss on the
sale of fixed maturity and equity securities amounted to $0 million and $0.5
million, respectively. The fair value of the fixed maturity and equity
securities at the time of sale was $0 million and $1.4 million, respectively.
The decision to sell these securities was based upon managements assessment of
economic conditions and with regard to the equity security sales the desire to
limit investment exposure to the equity market based upon this assessment.

Results of Operations (Three Months ended March 31, 2003 vs. March 31, 2002)

Premiums:Gross written premiums grew $56.8 million (41.6%) to $193.3
million for the three months ended March 31, 2003 from $136.5 million for the
same period of 2002; gross earned premiums grew $53.9 million (45.3%) to $173.0
million for the three months ended March 31, 2003 from $119.1 million for the
same period of 2002; net written premiums increased $62.1 million (56.7%) to
$171.6 million for the three months ended March 31, 2003 from $109.5 million
for the same period of 2002; and net earned premiums grew $59.2 million (66.4%)
to $148.4 million in 2003 from $89.2 million in 2002.

The respective gross written premium increases for commercial lines, specialty
lines and personal lines segments for the three months ended March 31, 2003 vs.
March 31, 2002 amount to $39.7 million (43.8%), $13.6 million (55.7%) and $3.5
million (16.4%), respectively. The overall growth in gross written premiums is
primarily attributable to the following:



| |  | Further 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 displacement of certain competitor property and casualty insurance
companies and their independent agency relationships continues to
result in new agency relationship opportunities for the Company.
These relationship opportunities 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| 
| |  | As a result of firming prices in the property and casualty industry,
rate increases on renewal business have approximated 6.0%, 13.0%, and
9.0% for the commercial, specialty and the personal lines segments,
respectively. Additionally, in force policy counts have increased
33.0% and 25.0% for the commercial and specialty lines segments,
respectively, primarily as a result of the factors discussed above.
Policy counts have decreased approximately 1.0% for the personal lines
segment as a result of restricting new business and not renewing
certain business to manage overall property exposures and the related
catastrophe loss considerations.

Pursuant to a routine underwriting review which focused on pricing adequacy and
loss experience, as well as other underwriting criteria, the Company cancelled
a Commercial Automobile Excess Liability Insurance customer (Commercial Lines
Underwriting Group) effective October 22, 2002 as a result of an unacceptable
underwriting risk profile. Such customers gross written premium and net
written premium amounted to $0 and $8.9 million and $0 and $2.5 million,
respectively, for the three months ended March 31, 2003 and March 31, 2002,
respectively.

Additionally, the respective net written premium increases for commercial
lines, specialty lines and personal lines segments for the three months ended
March 31, 2003 vs. March 31, 2002 amount to $47.6 million (63.6%), $12.4
million (54.4%) and $2.1 million (17.8%) respectively. The differing
percentage increase in net written premiums versus gross written premiums for
the commercial lines segment during the period results from lower reinsurance
costs (ceded premiums) as a result of increasing the Companys loss retention
from $0.5 million to $2.0 million on its per risk property reinsurance treaty
and from $0.9 million to $1.0 million on its excess liability reinsurance
treaty effective January 1, 2003.

14



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##### Table of Contents



PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

Net Investment IncomeNet investment income approximated $9.8 million for
the three months ended March 31, 2003 and $8.9 million for the same period of
2002. Total investments grew to $1,002.4 million at March 31, 2003 from $731.3
million at March 31, 2002. The growth in investment income is due to investing
net cash flows provided from operating activities The capital market
environment during most of 2002 and 2003 (low U.S. Treasury yields) had the
effect of increasing the level of prepayments in certain of the Companys
interest rate sensitive investments. The Companys average duration of its
fixed income portfolio approximated 3.2 years at March 31, 2003 and March 31,
2002. Additionally, due to the capital market environment, the Company has
invested approximately $66.4 million in overall AAA rated floating rate and
shorter amortizing securities to reduce interest rate risk with the expectation
of reinvesting these funds into longer duration investments at higher future
fixed income rates. The Companys tax equivalent book yield on its fixed
income holdings was 4.8% at March 31, 2003, compared to 6.2% at March 31, 2002.

The total return, which includes the effect of realized and unrealized
gains and losses, of the Companys fixed income portfolio was .97% and .66% for
the three months ended March 31, 2003 and 2002, respectively, versus the Lehman
Brothers Intermediate Aggregate Bond Index (the Index) total return of 1.27%
and .33% for the same periods, respectively. While the performance during the
three months ended March 31, 2003 and 2002 was similar to the total return of
the Index, performance differed from the Index due primarily to the following
factors:



| |  | the Companys fixed income portfolio is overweighted in the spread sectors, versus the Index, to capture the incremental
spread available in non-Treasury securities consistent with its investment objective of achieving the highest after-tax
risk adjusted yields; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the Company maintains a higher level of credit quality in the portfolio versus the Index.                                                                                                                                                                                 

Net Realized Investment Gain (Loss):Net realized investment gains
(losses) were ($1.1) million for the three months ended March 31, 2003 and
$47,000 for the same period in 2002. The Company realized net investment gains
of $0.4 million from the sale of fixed maturity securities during the three
months ended March 31, 2003, and $0.9 million and $0.6 million in non-cash
realized investment losses for common stock and fixed maturity investments,
respectively, as a result of the Companys impairment evaluation. The Company
realized net investment gains of $104,000 from the sales of common stock equity
securities and $57,000 in net investment losses from the sales of fixed
maturity securities during the three months ended March 31, 2002.

Other Income: Other income approximated $661,000 for the three months
ended March 31, 2003 and $1,000 for the same period of 2002. Other income
primarily consists of commissions earned on brokered personal lines business,
and to a lesser extent brokered commercial lines business. The Company is
seeking to increase brokering activities in its personal lines segment as it is
restricting new business and not renewing certain policies in designated areas
of Florida as a result of its property exposures in these areas and related
catastrophe loss considerations.

Net Loss and Loss Adjustment Expenses:Net loss and loss adjustment
expenses increased $37.4 million (70.6%) to $90.4 million for the three months
ended March 31, 2003 from $53.0 million for the same period of 2002 and the
loss ratio increased to 60.9% in 2003 from 59.4% in 2002. This increase in net
loss and loss adjustment expenses was due principally to the 66.4% growth in
net earned premiums. (see Premiums)

Acquisition Costs and Other Underwriting Expenses:Acquisition costs and
other underwriting expenses increased $18.6 million (66.9%) to $46.4 million
for the three months ended March 31, 2003 from $27.8 million for the same
period of 2002. This increase was due primarily to the 66.4% growth in net
earned premiums, and in part by:



| |  | A higher weighted average effective commission rate incurred on the
commercial and specialty lines segment products of 13.8% for the three
months ended March 31, 2003 compared to a weighted average effective
commission rate of 13.4% for the three months ended March 31, 2002,
primarily due to increases for preferred agent profit shares.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15



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##### Table of Contents



PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

Other Operating Expenses: Other operating expenses increased $0.2 million
to $1.7 million for the three months ended March 31, 2003 from $1.5 million for
the same period of 2002 as the Company continues to control its expenses.

Income Tax Expense:The Companys effective tax rate for the three months
ended March 31, 2003 and 2002 was 31.2% and 32.4%, respectively. The effective
rates differed from the 35% statutory rate principally due to investments in
tax-exempt securities. The decrease in the effective tax rate is principally
due to a greater investment of cash flows in tax-exempt securities relative to
taxable securities.

Liquidity and Capital Resources

For the three months ended March 31, 2003, the Companys investments
experienced unrealized investment depreciation of $3.2 million, net of the
related deferred tax benefit of $1.7 million. At March 31, 2003, the Company
had total investments with a carrying value of $1,002.4 million, of which 94.9%
consisted of investments in fixed maturity securities, including U.S. treasury
securities and obligations of U.S. government corporations and agencies,
obligations of states and political subdivisions, corporate debt securities,
collateralized mortgage securities and asset backed securities. The
collateralized mortgage securities and asset backed securities consist of short
tranche securities possessing favorable pre-payment risk profiles. The
remaining 5.1% of the Companys total investments consisted primarily of
publicly traded common stock securities.

The Company produced net cash from operations of $82.0 million and $54.2
million, respectively, for the three months ended March 31, 2003 and 2002.
Sources of operating funds consist primarily of net premiums written, and
investment income. Funds are used primarily to pay claims and operating
expenses and for the purchase of investments. The source of cash from
operations for the three months ended March 31, 2003 was primarily generated
from strong premium growth during the current quarter due to increases in the
number of policies written and price increases realized on renewal business.
Net loss and loss expense payments were $48.5 million and $32.8 million,
respectively, for the three months ended March 31, 2003 and 2002. Management
believes that the Company has adequate liquidity to pay all claims and meet all
other cash needs.

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 March 31, 2003 the insurance
subsidiaries borrowing capacity was $89.0 million. The insurance subsidiaries
have utilized a portion of their 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 $49.3 million at March 31, 2003 and bear interest at
adjusted LIBOR and mature twelve months from inception and are collateralized
by $59.9 million of the Companys fixed maturity securities. The
weighted-average interest rate on borrowings outstanding as of March 31, 2003
was 1.40%.

Risk-based capital is a method developed by the NAIC designed to measure
the acceptable amount of capital and surplus an insurer should have based on
the inherent specific risks of each insurer. The adequacy of a companys
actual capital and surplus is evaluated by a comparison to the risk-based
capital results. Insurers failing to meet minimum risk-based capital
requirements 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.

16



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##### Table of Contents



PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(Continued)

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) claims development and the adequacy of our
liability for unpaid loss and loss adjustment; (vi) severity of natural
disasters and other catastrophe losses; (vii) adequacy of reinsurance coverage
which may be obtained by the Company; (viii) ability and willingness of our
reinsurers to pay; and (ix) future terroristic attacks.

17



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##### Table of Contents






PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosures About Market Risk

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.

|                                     |  |                                              |        |       |  |      |         |      |  |      |         |            |  |       |         |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------ |  | -------------------------------------------- | ------ | ----- |  | ---- | ------- | ---- |  | ---- | ------- | ---------- |  | ----- | ------- | ----- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                     |  | MARCH 31, 2003                               |        |       |  |     
|                                     |  | EXPECTED MATURITY DATES                      |        | TOTAL
|                                     |  | (In thousands, except average interest rate) |        | FAIR 
|                                     |  | 2003                                         |        | 2004  |  | 2005 |         | 2006 |  | 2007 |         | Thereafter |  | TOTAL |         | VALUE
|                                     |  |                                              |        |       |  |      |         |      |  |      |         |            |  |       |         |      
|FIXED MATURITIES
AVAILABLE FOR SALE: |  |                                              |        |       |  |      |         |      |  |      |         |            |  |       |         |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Principal Amount                     |  | $                                            | 35,550 |       |  | $    | 160,507 |      |  | $    | 172,146 |            |  | $     | 114,488 |       |  | $ | 190,775 |   |  | $ | 253,233 |   |  | $ | 926,699 |   |  | $ | 947,467 |  
|Book Value                           |  | $                                            | 35,511 |       |  | $    | 163,128 |      |  | $    | 177,938 |            |  | $     | 115,957 |       |  | $ | 192,180 |   |  | $ | 245,437 |   |  | $ | 930,151 |   |  |   |        |  
|Average Interest Rate                |  |                                              | 5.90   | %     |  |      | 3.79    | %    |  |      | 3.87    | %          |  |       | 4.01    | %     |  |   | 4.68    | % |  |   | 4.71    | % |  |   | 4.34    | % |  |   | 3.81    | %
|PREFERRED:                           |  |                                              |        |       |  |      |         |      |  |      |         |            |  |       |         |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Principal Amount                     |  |                                              |       |       |  |      |        |      |  | $    | 5,750   |            |  | $     | 4,500   |       |  |   |        |   |  | $ | 500     |   |  | $ | 10,750  |   |  | $ | 11,399  |  
|Book Value                           |  |                                              |       |       |  |      |        |      |  | $    | 5,923   |            |  | $     | 4,656   |       |  |   |        |   |  | $ | 499     |   |  | $ | 11,078  |   |  |   |        |  
|Average Interest Rate                |  |                                              |       |       |  |      |        |      |  |      | 6.07    | %          |  |       | 6.29    | %     |  |   |        |   |  |   | 5.87    | % |  |   | 6.16    | % |  |   | 5.98    | %
|SHORT-TERM INVESTMENTS:              |  |                                              |        |       |  |      |         |      |  |      |         |            |  |       |         |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Principal Amount                     |  | $                                            | 31,556 |       |  |      |        |      |  |      |        |            |  |       |        |       |  |   |        |   |  |   |        |   |  | $ | 31,556  |   |  | $ | 31,556  |  
|Book Value                           |  | $                                            | 31,556 |       |  |      |        |      |  |      |        |            |  |       |        |       |  |   |        |   |  |   |        |   |  | $ | 31,556  |   |  |   |        |  
|Average Interest Rate                |  |                                              | 1.37   | %     |  |      |        |      |  |      |        |            |  |       |        |       |  |   |        |   |  |   |        |   |  |   | 1.37    | % |  |   | 1.37    | %
|LOANS PAYABLE:                       |  |                                              |        |       |  |      |         |      |  |      |         |            |  |       |         |       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Principal Amount                     |  | $                                            | 34,156 |       |  | $    | 15,161  |      |  |      |        |            |  |       |        |       |  |   |        |   |  |   |        |   |  | $ | 49,317  |   |  |   |        |  
|Average Interest Rate                |  |                                              | 1.41   | %     |  |      | 1.37    | %    |  |      |        |            |  |       |        |       |  |   |        |   |  |   |        |   |  |   | 1.40    | % |  |   |        |  

18



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##### Table of Contents






PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Companys Chief
Executive Officer and its Chief Financial Officer, after evaluating the
effectiveness of the Companys disclosure controls and procedures (as defined
in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a
date within 90 days of the filing date of this quarterly report on Form 10-Q
(the Evaluation Date), have concluded that, as of the Evaluation Date, the
Companys disclosure controls and procedures were effective to ensure that
material information relating to the Company and its consolidated subsidiaries
would be made known to them by others within such entities, particularly during
the period in which this quarterly report on Form 10-Q was being prepared.

(b) Changes in Internal Controls. There were no significant changes in
the Companys internal controls or in other factors that could significantly
affect those controls subsequent to the Evaluation Date, including any
corrective actions with regard to deficiencies and material weaknesses in such
controls.

19



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##### Table of Contents






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

Item 1.  Legal Proceedings



| |                
| | ---------------
| | Not applicable.

Item 2.   Changes in Securities and Use of Proceeds



| |                
| | ---------------
| | Not applicable.

Item 3.  Defaults Upon Senior Securities



| |                
| | ---------------
| | Not applicable.

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



| |                
| | ---------------
| | Not applicable.

Item 5.  Other information



| |                
| | ---------------
| | Not applicable.

Item 6.  Exhibits and Reports on Form 8-K



| | a. |  | Exhibits:
| | -- |  | ---------

|                  |  |                                                                                                                                                                
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.       |  | Description                                                                                                                                                    
|                  |  |                                                                                                                                                                
|99.1*             |  | Certification of the Companys chief executive officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|                  |  |                                                                                                                                                                
|99.2*             |  | Certification of the Companys chief financial officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|                  |  |                                                                                                                                                                
|                  |  |                                                                                                                                                                
|* Filed herewith. |  |                                                                                                                                                                



| | b. |  | The Company filed the following report on Form 8-K during the
quarterly period ended March 31, 2003:
| | -- |  | ----------------------------------------------------------------------------------------------------

|                  |  |                                        
|----------------- |  | ---------------------------------------
|Date of Report    |  | Item Reported                          
|                  |  |                                        
|February 13, 2003 |  | February 13, 2003 Investor Presentation

20



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##### Table of Contents






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 |  | May 13, 2003 |  | /s/ James J. Maguire, Jr.                                                                                                               
|     |  |              |  |                                                                                                                                         
|     |  |              |  | James J. Maguire, Jr.
President and Chief Executive Officer
(Principal Executive Officer)                                               
|     |  |              |  |                                                                                                                                         
|Date |  | May 13, 2003 |  | /s/ Craig P. Keller                                                                                                                     
|     |  |              |  |                                                                                                                                         
|     |  |              |  | Craig P. Keller
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting 
Officer)

21



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##### Table of Contents






CERTIFICATION

I, James J. Maguire, Jr., President and Chief Executive Officer of Philadelphia
Consolidated Holding Corp., certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Philadelphia
Consolidated Holding Corp.;                                                                                                                                                                                                                                
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |         |  |                                      
|------------------- |  | ------- |  | -------------------------------------
|Date:  May 13, 2003 |  | Signed: |  | /s/ James J. Maguire, Jr.            
|                    |  |         |  |                                      
|                    |  | Name:   |  | James J. Maguire, Jr.                
|                    |  |         |  |                                      
|                    |  | Title:  |  | President and Chief Executive Officer
|                    |  |         |  |                                      

22



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##### Table of Contents






CERTIFICATION

I, Craig P. Keller, Chief Financial Officer of Philadelphia Consolidated
Holding Corp., certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Philadelphia
Consolidated Holding Corp.;                                                                                                                                                                                                                                
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |         |  |                        
|------------------ |  | ------- |  | -----------------------
|Date: May 13, 2003 |  | Signed: |  | /s/ Craig P. Keller    
|                   |  |         |  |                        
|                   |  | Name:   |  | Craig P. Keller        
|                   |  |         |  |                        
|                   |  | Title:  |  | Chief Financial Officer
|                   |  |         |  |                        

23