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

                                    FORM 10-Q

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

                For the Quarterly Period Ended September 30, 2002

                         COMMISSION FILE NUMBER 0-22280

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

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

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


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

                                 YES: |X| NO | |

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

                                 YES: |X| NO | |

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of November 12, 2002.

Preferred Stock, $.01 par value, no shares outstanding
Common Stock, no par value, 21,560,335 shares outstanding
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                                      INDEX

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

<TABLE>
<S>                                                                               <C>
Part I - Financial Information

     Item 1. Financial Statements:

         Consolidated Balance Sheets - September 30, 2002 and
           December 31, 2001                                                       3

         Consolidated Statements of Operations and Comprehensive
           Income - For the three and nine months ended
           September 30, 2002 and 2001                                             4

         Consolidated Statements of Changes in Shareholders' Equity - For the
           nine months ended September 30, 2002 and year ended
           December 31, 2001                                                       5

         Consolidated Statements of Cash Flows - For the nine
           months ended September 30, 2002 and 2001                                6

         Notes to Consolidated Financial Statements                               7-11

     Item 2

         Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                              12-17

     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
</TABLE>


                                       2
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                      As of
                                                            ----------------------------
                                                            September 30,   December 31,
                                                                2002            2001
                                                            (Unaudited)
                                                            ------------    ------------
                               ASSETS
<S>                                                         <C>             <C>
INVESTMENTS:
   FIXED MATURITIES AVAILABLE FOR SALE AT MARKET
     (AMORTIZED COST $787,746 AND $626,326) .............   $    815,257    $    632,416
   EQUITY SECURITIES AT MARKET (COST $44,164
     AND $34,065) .......................................         44,357          40,992
                                                            ------------    ------------
       TOTAL INVESTMENTS ................................        859,614         673,408

   CASH AND CASH EQUIVALENTS ............................         48,941          49,910
   ACCRUED INVESTMENT INCOME ............................          7,595           6,582
   PREMIUMS RECEIVABLE ..................................        132,745          96,025
   PREPAID REINSURANCE PREMIUMS AND REINSURANCE
     RECEIVABLES ........................................        135,360          99,601
   DEFERRED INCOME TAXES ................................          5,121           6,196
   DEFERRED ACQUISITION COSTS ...........................         60,212          41,526
   PROPERTY AND EQUIPMENT, NET ..........................         10,744          10,082
   GOODWILL .............................................         25,724          25,724
   OTHER ASSETS .........................................         10,184           8,668
                                                            ------------    ------------
       TOTAL ASSETS .....................................   $  1,296,240    $  1,017,722
                                                            ============    ============

                   LIABILITIES AND SHAREHOLDERS' EQUITY
POLICY LIABILITIES AND ACCRUALS:
   UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES .............   $    399,502    $    302,733
   UNEARNED PREMIUMS ....................................        306,282         197,839
                                                            ------------    ------------
       TOTAL POLICY LIABILITIES AND ACCRUALS ............        705,784         500,572
   LOANS PAYABLE ........................................         30,881          31,341
   PREMIUMS PAYABLE .....................................         40,711          25,659
   OTHER LIABILITIES ....................................         54,962          31,458
                                                            ------------    ------------
       TOTAL LIABILITIES ................................        832,338         589,030
                                                            ------------    ------------

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, 21,625,335 AND
     21,509,723 SHARES ISSUED AND OUTSTANDING ...........        270,949         268,509
   NOTES RECEIVABLE FROM SHAREHOLDERS ...................         (2,672)         (3,373)
   ACCUMULATED OTHER COMPREHENSIVE INCOME ...............         18,008           8,461
   RETAINED EARNINGS ....................................        177,617         155,095
                                                            ------------    ------------
       TOTAL SHAREHOLDERS' EQUITY .......................        463,902         428,692
                                                            ------------    ------------

       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......   $  1,296,240    $  1,017,722
                                                            ============    ============
</TABLE>

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


                                       3
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                               For the Three Months             For the Nine Months
                                                                Ended September 30,             Ended September 30,
                                                            ----------------------------    ----------------------------
                                                                2002            2001            2002            2001
                                                            ------------    ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>             <C>
REVENUE:
   NET EARNED PREMIUMS ..................................   $    106,146    $     77,755    $    295,663    $    215,981
   NET INVESTMENT INCOME ................................          9,497           8,238          27,727          24,371
   NET REALIZED INVESTMENT GAIN (LOSS) ..................            199             488          (2,935)          3,105
   OTHER INCOME .........................................            419             105             435             221
                                                            ------------    ------------    ------------    ------------
     TOTAL REVENUE ......................................        116,261          86,586         320,890         243,678
                                                            ------------    ------------    ------------    ------------

LOSSES AND EXPENSES:
   LOSS AND LOSS ADJUSTMENT EXPENSES ....................        114,325          59,109         252,003         159,333
   NET REINSURANCE RECOVERIES ...........................        (35,976)         (8,469)        (59,773)        (26,675)
                                                            ------------    ------------    ------------    ------------
   NET LOSS AND LOSS ADJUSTMENT EXPENSES ................         78,349          50,640         192,230         132,658
   ACQUISITION COSTS AND OTHER
        UNDERWRITING EXPENSES ...........................         32,343          25,880          91,221          71,043
   OTHER OPERATING EXPENSES .............................          1,632             974           4,570           5,136
                                                            ------------    ------------    ------------    ------------
     TOTAL LOSSES AND EXPENSES ..........................        112,324          77,494         288,021         208,837
                                                            ------------    ------------    ------------    ------------

MINORITY INTEREST:  DISTRIBUTIONS ON COMPANY OBLIGATED
MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
   SUBSIDIARY TRUST ....................................             --              --              --           2,749
                                                            ------------    ------------    ------------    ------------

INCOME BEFORE INCOME TAXES ..............................          3,937           9,092          32,869          32,092
                                                            ------------    ------------    ------------    ------------

INCOME TAX EXPENSE (BENEFIT):
   CURRENT ..............................................          2,044           3,571          14,413          14,269
   DEFERRED .............................................           (999)           (451)         (4,066)         (3,599)
                                                            ------------    ------------    ------------    ------------

     TOTAL INCOME TAX EXPENSE ...........................          1,045           3,120          10,347          10,670
                                                            ------------    ------------    ------------    ------------

     NET INCOME .........................................   $      2,892    $      5,972    $     22,522    $     21,422
                                                            ============    ============    ============    ============

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
   HOLDING GAIN ARISING DURING PERIOD ...................          6,364           3,221           7,639           1,709
   RECLASSIFICATION ADJUSTMENT ..........................           (129)           (317)          1,908          (2,018)
                                                            ------------    ------------    ------------    ------------
   OTHER COMPREHENSIVE INCOME (LOSS) ....................          6,235           2,904           9,547            (309)
                                                            ------------    ------------    ------------    ------------
COMPREHENSIVE INCOME ....................................   $      9,127    $      8,876    $     32,069    $     21,113
                                                            ============    ============    ============    ============

PER AVERAGE SHARE DATA:
   BASIC EARNINGS PER SHARE .............................   $       0.13    $       0.34    $       1.04    $       1.37
                                                            ============    ============    ============    ============
   DILUTED EARNINGS PER SHARE ...........................   $       0.13    $       0.32    $       1.01    $       1.31
                                                            ============    ============    ============    ============

WEIGHTED-AVERAGE COMMON SHARES
   OUTSTANDING ..........................................     21,625,799      17,808,317      21,577,670      15,645,956
WEIGHTED-AVERAGE SHARE EQUIVALENTS
   OUTSTANDING ..........................................        636,828         704,534         716,017         766,746
                                                            ------------    ------------    ------------    ------------
WEIGHTED-AVERAGE SHARES AND SHARE
   EQUIVALENTS OUTSTANDING ..............................     22,262,627      18,512,851      22,293,687      16,412,702
                                                            ============    ============    ============    ============
</TABLE>

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


                                       4
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                   For the Nine Months
                                                          Ended             For the Year Ended
                                                    September 30, 2002         December 31,
                                                        (Unaudited)                2001
                                                   -------------------      ------------------
<S>                                                <C>                      <C>
COMMON STOCK:
  BALANCE AT BEGINNING OF YEAR ..................      $    268,509            $     46,582

  ISSUANCE OF SHARES PURSUANT TO PUBLIC OFFERING                 --                 114,518

  ISSUANCE OF SHARES PURSUANT TO STOCK
    PURCHASE CONTRACTS ..........................                --                  98,905

  EXERCISE OF EMPLOYEE STOCK OPTIONS ............             2,115                   6,437

  ISSUANCE OF SHARES PURSUANT TO STOCK
    PURCHASE PLANS ..............................               325                   2,067
                                                       ------------            ------------

      BALANCE AT END OF PERIOD ..................           270,949                 268,509
                                                       ------------            ------------

NOTES RECEIVABLE FROM SHAREHOLDERS:
  BALANCE AT BEGINNING OF YEAR ..................            (3,373)                 (2,287)

  NOTES RECEIVABLE FORFEITED (ISSUED) PURSUANT
    TO STOCK PURCHASE PLAN ......................                84                  (2,158)

  COLLECTION OF NOTES RECEIVABLE ................               617                   1,072
                                                       ------------            ------------

      BALANCE AT END OF PERIOD ..................            (2,672)                 (3,373)
                                                       ------------            ------------

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF
  DEFERRED INCOME TAXES:
  BALANCE AT BEGINNING OF YEAR ..................             8,461                  13,494
  OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES             9,547                  (5,033)
                                                       ------------            ------------

      BALANCE AT END OF PERIOD ..................            18,008                   8,461
                                                       ------------            ------------

RETAINED EARNINGS:

  BALANCE AT BEGINNING OF YEAR ..................           155,095                 124,536

  NET INCOME ....................................            22,522                  30,559
                                                       ------------            ------------

      BALANCE AT END OF PERIOD ..................           177,617                 155,095
                                                       ------------            ------------

      TOTAL SHAREHOLDERS' EQUITY ................      $    463,902            $    428,692
                                                       ============            ============
</TABLE>

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


                                       5
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                               For the Nine Months Ended
                                                                     September 30,
                                                             -----------------------------
                                                                2002              2001
                                                             -----------       -----------
<S>                                                          <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   NET INCOME .........................................      $    22,522       $    21,422
   ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
     PROVIDED BY OPERATING ACTIVITIES:
     NET REALIZED INVESTMENT (GAIN) LOSS ..............            2,935            (3,105)
     DEPRECIATION AND AMORTIZATION EXPENSE ............            1,345             1,967
     DEFERRED INCOME TAX BENEFIT ......................           (4,066)           (3,599)
     CHANGE IN PREMIUMS RECEIVABLE ....................          (36,720)          (28,930)
     CHANGE IN OTHER RECEIVABLES ......................          (36,772)          (24,482)
     CHANGE IN INCOME TAXES PAYABLE ...................           (5,520)           (9,219)
     CHANGE IN DEFERRED ACQUISITION COSTS .............          (18,686)           (8,631)
     CHANGE IN OTHER ASSETS ...........................             (458)            1,054
     CHANGE IN UNPAID LOSS AND LOSS ADJUSTMENT
       EXPENSES .......................................           96,769            49,293
     CHANGE IN UNEARNED PREMIUMS ......................          108,443            54,705
     CHANGE IN OTHER LIABILITIES ......................           32,490            12,935
     TAX BENEFIT FROM EXERCISE OF EMPLOYEE
       STOCK OPTIONS ..................................            1,251            25,607
                                                             -----------       -----------
         NET CASH PROVIDED BY OPERATING ACTIVITIES ....          163,533            89,017
                                                             -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   PROCEEDS FROM SALES OF INVESTMENTS IN FIXED
       MATURITIES .....................................          188,746            27,063
   PROCEEDS FROM MATURITY OF INVESTMENTS IN FIXED
       MATURITIES .....................................           82,793            47,099
   PROCEEDS FROM SALES OF INVESTMENTS IN EQUITY
       SECURITIES .....................................           13,898            12,603
   COST OF FIXED MATURITIES ACQUIRED ..................         (422,182)         (178,611)
   COST OF EQUITY SECURITIES ACQUIRED .................          (26,703)          (11,691)
   PURCHASE OF PROPERTY AND EQUIPMENT .................           (2,484)           (1,385)
                                                             -----------       -----------
       NET CASH USED BY INVESTING ACTIVITIES ..........         (165,932)         (104,922)
                                                             -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   REPAYMENTS ON LOANS PAYABLE ........................             (461)          (22,000)
   PROCEEDS FROM LOANS PAYABLE ........................               --            29,841
   PROCEEDS FROM EXERCISE OF EMPLOYEE STOCK OPTIONS ...              864             2,911
   PROCEEDS FROM COLLECTION OF NOTES RECEIVABLE .......              617               708
   PROCEEDS FROM SHARES ISSUED PURSUANT TO
     STOCK PURCHASE PLANS .............................              410                33
                                                             -----------       -----------
         NET CASH PROVIDED BY FINANCING ACTIVITIES ....            1,430            11,493
                                                             -----------       -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS .............             (969)           (4,412)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......           49,910            49,742
                                                             -----------       -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............      $    48,941       $    45,330
                                                             ===========       ===========

CASH PAID DURING THE PERIOD FOR:
   INCOME TAXES .......................................      $    18,412       $     5,435
   INTEREST ...........................................      $       466       $       130

NON-CASH TRANSACTIONS:
   ISSUANCE OF SHARES (FORFEITURES) PURSUANT TO
    EMPLOYEE STOCK PURCHASE PLAN IN EXCHANGE FOR ......      $       (84)      $     1,243
    NOTES RECEIVABLE
   ISSUANCE OF COMMON SHARES IN SATISFACTION OF
    STOCK PURCHASE CONTRACTS ..........................               --       $    98,905
</TABLE>

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


                                       6
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.    Basis of Presentation

      The consolidated financial statements as of and for the nine months ended
      September 30, 2002 and 2001 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 nine
      months ended September 30, 2002 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, 2001.

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
      September 30, 2002, 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 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.

      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 September 30, 2002 and
      2001 were $0.3 million and $0 million, respectively, and for the nine
      months ended September 30, 2002 and 2001 were $1.5 million and $4.3
      million, respectively, as a result of the other than temporary impairment
      evaluations.

3.    Goodwill

      The Company adopted the provisions of Statement of Financial Accounting
      Standards No. 142 (" SFAS No. 142"), "Goodwill and Other Intangible
      Assets" on January 1, 2002. SFAS No. 142 eliminates the practice of
      amortizing goodwill through periodic charges to earnings and establishes a
      new methodology for recognizing and measuring goodwill and other
      intangible assets. Under this new accounting standard, the Company ceased
      goodwill amortization on January 1, 2002. Goodwill amortization for the
      nine months ended September 30, 2001 amounted to $1.1 million.


                                       7
<PAGE>
      The following table provides a reconciliation of the prior year's three
      and nine month periods ended September 30 reported net income to adjusted
      net income had SFAS No. 142 been applied at the beginning of fiscal 2001
      (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                               Three Months Ended                  Nine Months Ended
                                                   September 30,                      September 30,
                                          ------------------------------      ------------------------------
                                              2002              2001              2002              2001
                                          ------------      ------------      ------------      ------------
<S>                                       <C>               <C>               <C>               <C>
Reported net income ................      $      2,892      $      5,972      $     22,522      $     21,422
Adjustment for goodwill amortization                --               376                --             1,128
                                          ------------      ------------      ------------      ------------
Adjusted net income ................      $      2,892      $      6,348      $     22,522      $     22,550
                                          ============      ============      ============      ============
Reported basic earnings per share ..      $       0.13      $       0.34      $       1.04      $       1.37
Adjustment for goodwill amortization                --              0.02                --              0.07
                                          ------------      ------------      ------------      ------------
Adjusted basic earnings per share ..      $       0.13      $       0.36      $       1.04      $       1.44
                                          ============      ============      ============      ============
Reported diluted earnings per share       $       0.13      $       0.32      $       1.01      $       1.31
Adjustment for goodwill amortization                --              0.02                --              0.07
                                          ------------      ------------      ------------      ------------
Adjusted diluted earnings per share       $       0.13      $       0.34      $       1.01      $       1.38
                                          ============      ============      ============      ============
</TABLE>

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
      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 September 30, 2002, the related adjustments could have a
      material adverse impact on the Company's financial condition, and results
      of operations.

      Due to adverse changes in the estimates of insured events in prior years
      for the Company's outstanding residual value policies, as previously
      reported in the Company's Form 10-Q for the period ending June 30, 2002,
      the Company, as part of its monitoring and evaluation procedures, engaged
      two consulting firms to aid in evaluating the ultimate potential loss
      exposure under these policies. As a result of the indications of these
      evaluations, the Company increased its unpaid loss and loss adjustment
      expenses by $27.0 million ($15.0 million net of reinsurance recoverables).
      The adverse development results from changes in various factors primarily
      related to the used car market which have occurred subsequent to the
      inception date of the policies.

      Additionally, the increase in unpaid loss and loss adjustment expense
      ceded to the Company's reinsurer for the residual value policies utilized
      the remaining reinsurance limit available to the Company under a combined
      coverage reinsurance contract. Accordingly, the ceded unearned premium
      reserve of $5.1 million for the Company's combined coverage reinsurance
      was fully amortized during the three months ended September 30, 2002. The
      combined coverage reinsurance contract provided a 2002 accident year
      aggregate stop loss cover which had not been utilized by the Company,
      reinsurance coverage for the residual value line of business, and $10.0
      million excess $5.0 million catastrophe property reinsurance coverage.
      The Company continues to maintain $306.5 million excess $15.0 million
      catastrophe property reinsurance on its Florida business.

5.    Loans Payable

      As of September 30, 2002, the Company had aggregate borrowings of $30.9
      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.


                                       8
<PAGE>
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 and nine months ended
      September 30, 2002 and 2001, respectively (in thousands, except per share
      data):

<TABLE>
<CAPTION>
                                                    As of and For the Three      As of and For the Nine
                                                         Months Ended               Months Ended
                                                         September 30,              September 30
                                                    -----------------------     ----------------------
                                                      2002          2001          2002          2001
                                                    --------      --------      --------      --------
<S>                                                 <C>           <C>           <C>           <C>
Weighted-Average Common Shares Outstanding ...        21,626        17,808        21,578        15,646

Weighted-Average Share Equivalents Outstanding           637           705           716           767
                                                    --------      --------      --------      --------

Weighted-Average Shares and Share
 Equivalents Outstanding .....................        22,263        18,513        22,294        16,413
                                                    ========      ========      ========      ========

Net Income ...................................      $  2,892      $  5,972      $ 22,522      $ 21,422
                                                    ========      ========      ========      ========

Basic Earnings per Share .....................      $   0.13      $   0.34      $   1.04      $   1.37
                                                    ========      ========      ========      ========

Diluted Earnings per Share ...................      $   0.13      $   0.32      $   1.01      $   1.31
                                                    ========      ========      ========      ========
</TABLE>

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

      On April 30, 2002, U.S. Bank, N.A. d/b/a Firstar Bank ("Firstar"), a bank
      to which one of the Company's insurance subsidiaries, Philadelphia
      Indemnity Insurance Company ("PIIC"), issued insurance coverages, filed a
      complaint against PIIC in the United States District Court for the
      Southern District of Ohio (Western Division). 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 Firstar relating to vehicles
      financed by Firstar. The complaint alleges that as a result of the loss
      adjustment change Firstar may suffer damages of as much as $75,000,000. 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 intends to vigorously defend this action.

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 Gains arising during the three and nine
      months ended September 30, 2002 and 2001 was $3.4 million and $1.7
      million, respectively, and $4.1 million and $0.9 million, respectively.
      The related tax effect of Reclassification Adjustments for the three and
      nine months ended September 30, 2002 and 2001 was ($0.1) million and
      ($0.2) million, respectively, and $1.0 million and ($1.1) million
      respectively.

10.   Segment Information

      The Company's operations are classified into three reportable business
      segments: The Commercial Lines Underwriting Group ("Commercial Lines"),
      which has underwriting responsibility for the Commercial Automobile and
      Commercial Property and Commercial multi-peril package insurance products;
      the Specialty Lines Underwriting Group ("Specialty Lines"), which has
      underwriting responsibility for the professional liability insurance
      products; and the Personal Lines Group ("Personal Lines"), which designs,
      markets and underwrites personal property and casualty insurance products
      for the Manufactured Housing and Homeowners


                                       9
<PAGE>
      markets. The reportable segments operate solely within the United States.
      The segments follow the same accounting policies used for the Company's
      consolidated financial statements. Management evaluates a segment's
      performance based upon underwriting results.

      Following is a tabulation of business segment information for the three
      and nine months ended September 30, 2002 and 2001. Corporate information
      is included to reconcile segment data to the consolidated financial
      statements (in thousands):

<TABLE>
<CAPTION>
                                                                         Nine Months Ended,
                                               ------------------------------------------------------------------------
                                               Commercial     Specialty       Personal
                                                 Lines          Lines          Lines        Corporate         Total
                                              ------------   ------------   ------------   ------------    ------------
<S>                                           <C>            <C>            <C>            <C>             <C>
September 30, 2002:
Gross Written Premiums ....................   $    360,169   $     82,427   $     65,125   $         --    $    507,721
                                              ------------   ------------   ------------   ------------    ------------
Net Written Premiums ......................   $    287,797   $     76,625   $     31,670   $         --    $    396,092
                                              ------------   ------------   ------------   ------------    ------------
Revenue:
  Net Earned Premiums .....................   $    208,396   $     61,157   $     26,110   $         --    $    295,663
  Net Investment Income ...................             --             --             --         27,727          27,727
  Net Realized Investment Loss ............             --             --             --         (2,935)         (2,935)
  Other Income ............................             --             --          1,294           (859)            435
                                              ------------   ------------   ------------   ------------    ------------
  Total Revenue ...........................        208,396         61,157         27,404         23,933         320,890
                                              ------------   ------------   ------------   ------------    ------------

Losses and Expenses:
   Net Loss and Loss Adjustment Expenses ..        147,723         30,551         13,956             --         192,230
   Acquisition Costs and Other Underwriting
     Expenses .............................             --             --             --         91,221          91,221
   Other Operating Expenses ...............             --             --            140          4,430           4,570
                                              ------------   ------------   ------------   ------------    ------------
   Total Losses and Expenses ..............        147,723         30,551         14,096         95,651         288,021
                                              ------------   ------------   ------------   ------------    ------------

Income Before Income Taxes ................         60,673         30,606         13,308        (71,718)         32,869

Total Income Tax Expense ..................             --             --             --         10,347          10,347
                                              ------------   ------------   ------------   ------------    ------------

Net Income ................................   $     60,673   $     30,606   $     13,308   $    (82,065)   $     22,522
                                              ============   ============   ============   ============    ============

Total Assets ..............................   $         --   $         --   $    215,058   $  1,081,182    $  1,296,240
                                              ============   ============   ============   ============    ============

September 30, 2001:
Gross Written Premiums ....................   $    236,795   $     60,699   $     64,406   $         --    $    361,900
                                              ------------   ------------   ------------   ------------    ------------
Net Written Premiums ......................   $    167,088   $     53,465   $     35,268   $         --    $    255,821
                                              ------------   ------------   ------------   ------------    ------------
Revenue:
  Net Earned Premiums .....................   $    137,106   $     50,060   $     28,815   $         --    $    215,981
  Net Investment Income ...................             --             --             --         24,371          24,371
  Net Realized Investment Gain ............             --             --             --          3,105           3,105
  Other Income ............................             --             --          2,189         (1,968)            221
                                              ------------   ------------   ------------   ------------    ------------
  Total Revenue ...........................        137,106         50,060         31,004         25,508         243,678
                                              ------------   ------------   ------------   ------------    ------------

Losses and Expenses:
   Net Loss and Loss Adjustment Expenses ..         86,551         31,458         14,649             --         132,658
   Acquisition Costs and Other Underwriting
     Expenses .............................             --             --             --         71,043          71,043
   Other Operating Expenses ...............             --             --          1,162          3,974           5,136
                                              ------------   ------------   ------------   ------------    ------------
   Total Losses and Expenses ..............         86,551         31,458         15,811         75,017         208,837
                                              ------------   ------------   ------------   ------------    ------------

Minority Interest:  Distributions on
Company Obligated Mandatorily Redeemable
  Preferred Securities of Subsidiary
  Trust ...................................             --             --             --          2,749           2,749
                                              ------------   ------------   ------------   ------------    ------------

Income Before Income Taxes ................         50,555         18,602         15,193        (52,258)         32,092

Total Income Tax Expense ..................             --             --             --         10,670          10,670
                                              ------------   ------------   ------------   ------------    ------------

Net Income ................................   $     50,555   $     18,602   $     15,193   $    (62,928)   $     21,422
                                              ============   ============   ============   ============    ============

Total Assets ..............................   $         --   $         --   $    174,652   $    704,916    $    879,568
                                              ============   ============   ============   ============    ============
</TABLE>


                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                                       Three Months Ended,
                                              -------------------------------------------------------------------------
                                               Commercial     Specialty       Personal
                                                 Lines          Lines          Lines        Corporate         Total
                                              ------------   ------------   ------------   ------------    ------------
<S>                                           <C>            <C>            <C>            <C>             <C>
September 30, 2002:
Gross Written Premiums ....................   $    161,139   $     30,103   $     19,232   $         --    $    210,474
                                              ------------   ------------   ------------   ------------    ------------
Net Written Premiums ......................   $    126,595   $     28,137   $      6,501   $         --    $    161,233
                                              ------------   ------------   ------------   ------------    ------------
Revenue:
  Net Earned Premiums .....................   $     77,051   $     21,748   $      7,347   $         --    $    106,146
  Net Investment Income ...................             --             --             --          9,497           9,497
  Net Realized Investment Gain ............             --             --             --            199             199
  Other Income ............................             --             --            372             47             419
                                              ------------   ------------   ------------   ------------    ------------
  Total Revenue ...........................         77,051         21,748          7,719          9,743         116,261
                                              ------------   ------------   ------------   ------------    ------------

Losses and Expenses:
   Net Loss and Loss Adjustment Expenses ..         66,457          7,398          4,494             --          78,349
   Acquisition Costs and Other Underwriting
     Expenses .............................             --             --             --         32,343          32,343
   Other Operating Expenses ...............             --             --             78          1,554           1,632
                                              ------------   ------------   ------------   ------------    ------------
   Total Losses and Expenses ..............         66,457          7,398          4,572         33,897         112,324
                                              ------------   ------------   ------------   ------------    ------------

Income Before Income Taxes ................         10,594         14,350          3,147        (24,154)          3,937

Total Income Tax Expense ..................             --             --             --          1,045           1,045
                                              ------------   ------------   ------------   ------------    ------------

Net Income ................................   $     10,594   $     14,350   $      3,147   $    (25,199)   $      2,892
                                              ============   ============   ============   ============    ============

Total Assets ..............................   $         --   $         --   $    215,058   $  1,081,182    $  1,296,240
                                              ============   ============   ============   ============    ============

September 30, 2001:
Gross Written Premiums ....................   $    101,206   $     19,101   $     16,886             --    $    137,193
                                              ------------   ------------   ------------   ------------    ------------
Net Written Premiums ......................   $     72,782   $     16,733   $      6,683             --    $     96,198
                                              ------------   ------------   ------------   ------------    ------------
Revenue:
  Net Earned Premiums .....................   $     51,028   $     17,350   $      9,377             --    $     77,755
  Net Investment Income ...................             --             --             --          8,238           8,238
  Net Realized Investment Gain ............             --             --             --            488             488
  Other Income ............................             --             --            591           (486)            105
                                              ------------   ------------   ------------   ------------    ------------
  Total Revenue ...........................         51,028         17,350          9,968          8,240          86,586
                                              ------------   ------------   ------------   ------------    ------------

Losses and Expenses:
   Net Loss and Loss Adjustment Expenses ..         35,040         10,854          4,746             --          50,640
   Acquisition Costs and Other Underwriting
     Expenses .............................             --             --             --         25,880          25,880
   Other Operating Expenses ...............             --             --            384            590             974
                                              ------------   ------------   ------------   ------------    ------------
   Total Losses and Expenses ..............         35,040         10,854          5,130         26,470          77,494
                                              ------------   ------------   ------------   ------------    ------------

Income Before Income Taxes ................         15,988          6,496          4,838        (18,230)          9,092

Total Income Tax Expense ..................             --             --             --          3,120           3,120
                                              ------------   ------------   ------------   ------------    ------------

Net Income ................................   $     15,988   $      6,496   $      4,838   $    (21,350)   $      5,972
                                              ============   ============   ============   ============    ============

Total Assets ..............................             --             --   $    174,652   $    704,916    $    879,568
                                              ============   ============   ============   ============    ============
</TABLE>


                                       11
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                              FINANCIAL CONDITION

GENERAL

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

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, 2001.

RESULTS OF OPERATIONS (NINE MONTHS ENDED SEPTEMBER 30, 2002 VS. SEPTEMBER 30,
2001)

      Premiums: Gross written premiums grew $145.8 million (40.3%) to $507.7
million for the nine months ended September 30, 2002 from $361.9 million for the
same period of 2001; gross earned premiums grew $92.7 million (30.2%) to $399.7
million for the nine months ended September 30, 2002 from $307.0 million for the
same period of 2001; net written premiums increased $140.3 million (54.9%) to
$396.1 million for the nine months ended September 30, 2002 from $255.8 million
for the same period of 2001; and net earned premiums grew $79.7 million (36.9%)
to $295.7 million in 2002 from $216.0 million in 2001.

The respective gross written premium increases for commercial lines, specialty
lines and personal lines segments for the nine months ended September 30, 2002
vs. September 30, 2001 amount to $123.4 million (52.1%), $21.7 million (35.8%)
and $0.7 million (1.1%), respectively. The overall growth in gross written
premiums is primarily attributable to the following:

-     Rating downgrades of certain major competitor property and casualty
      insurance companies have led to their diminished presence in the Company's
      commercial and specialty lines business segments and continue to result


                                       12
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                              FINANCIAL CONDITION
                                   (Continued)

      in additional prospects and increased premium writings, most notably for
      the Company's various commercial package and non-profit D&O product lines.

-     The consolidation of certain competitor property and casualty insurance
      companies has led to the displacement of certain of their independent
      agency relationships. This consolidation continues to result in new agency
      relationship opportunities for the Company. These relationships have
      resulted in additional prospects and premium writings for the Company's
      commercial and specialty lines segments.

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

-     Rate increases realized on renewal business for the commercial lines
      segment, the specialty lines segment and the personal lines segment and
      increases in the number of policies written.

Overall premium growth has been offset in part by the following factors:

-     Specialty Lines Segment - The Company's decision not to renew certain
      policies in the professional liability product lines due to inadequate
      pricing levels being experienced as a result of market conditions and/or
      loss experience emerging at higher than expected levels.

-     Personal Lines Segment - The Company's decision not to write new business
      or renew certain policies in designated areas of Florida in the Company's
      manufactured housing and homeowners product lines, based on an evaluation
      of property exposures and 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 $30.9 million and $9.5 million, respectively, for the nine
months ended September 30, 2002.

Additionally, the respective net written premium increases (decreases)
for commercial lines, specialty lines and personal lines segments for the nine
months ended September 30, 2002 vs. September 30, 2001 amount to $120.7 million
(72.2%), $23.2 million (43.3%) and ($3.6) million (10.2%) respectively. The
differing percentage increases (decreases) in net written premiums versus gross
written premiums for the period is primarily due to the Company commuting a
2001 accident year aggregate stop loss reinsurance program during the three
months ended June 30, 2002 whereby net written and net earned premiums
increased by $3.6 million ($2.4 million Commercial Lines, $0.8 million
Specialty Lines, $0.4 million Personal Lines), and in part to other various
changes in, or pricing of, the Company's reinsurance program. Additionally,
during the three months ended September 30, 2002, as a result of utilizing the
remaining reinsurance limit available to the Company under a combined coverage
reinsurance contract for its residual value line of business, the ceded
unearned premium reserve of $5.1 million related to this reinsurance was fully
amortized.

            Net Investment Income: Net investment income approximated $27.7
million for the nine months ended September 30, 2002 and $24.4 million for the
same period of 2001. Total investments grew to $859.6 million at September 30,
2002 from $543.6 million at September 30, 2001. The growth in investment income
is due to investing net cash flows provided from operating activities and the
proceeds of the Company's fourth quarter 2001 equity offering. The capital
market environment during 2001 and most of 2002 (low U.S. Treasury yields) had
the effect of increasing the level of prepayments in certain of the Company's
interest rate sensitive investments. Additionally, due to the capital market
environment, the Company has invested approximately $100 million in floating
rate and shorter amortizing securities to minimize interest rate risk with the
expectation of reinvesting these funds into longer duration investments at
higher future fixed income rates. The Company's average duration of its fixed
income portfolio approximated 3.3 years at September 30, 2002, compared to 3.1
years at September 30, 2001, and the Company's tax equivalent book yield on its
fixed income holdings was 5.7% at September 30, 2002, compared to 7.0% at
September 30, 2001.


                                       13
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                              FINANCIAL CONDITION
                                   (Continued)

            Net Realized Investment Gain (Loss): Net realized investment gains
(losses) were ($2.9) million for the nine months ended September 30, 2002 and
$3.1 million for the same period in 2001. The Company realized net investment
losses of $2.6 million from the sales of common stock equity securities and $1.2
million in net investment gains from the sale of fixed maturity securities
during the nine months ended September 30, 2002. Additionally, $1.5 million in
non-cash realized investment losses were recorded on certain securities as a
result of the Company's impairment evaluation. The Company realized net
investment gains of $5.9 million from the sales of common stock equity
securities and $1.5 million from the sales of fixed maturity securities during
the nine months ended September 30, 2001. These realized net investment gains
were offset in part by $4.3 million in non-cash realized investment losses
experienced on certain securities as a result of the Company's impairment
evaluation. The proceeds from the sales were reinvested in fixed maturity
securities to increase current investment income, lessen the Company's holdings
in certain common stock positions, and decrease the overall percentage of
investments in common stock securities.

            Other Income: Other income approximated $435,000 for the nine months
ended September 30, 2002 and $221,000 for the same period of 2001. 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
not writing new business or renewing certain policies in designated areas of
Florida for the Company's manufactured housing product 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 $59.5 million (44.8%) to $192.2 million for the nine months
ended September 30, 2002 from $132.7 million for the same period of 2001 and the
loss ratio increased to 65.0% in 2002 from 61.4% in 2001. This increase in net
loss and loss adjustment expenses was due principally to the 36.9% growth in net
earned premiums, and in part to the Company increasing loss and loss adjustment
expenses incurred by $32.0 million ($20.0 million net of reinsurance recover-
ables) as a result of changes in estimates of insured events in prior years.
Such adverse loss development is due to losses emerging at a higher rate on
automobile leases currently expiring on residual value policies than had been
originally anticipated when the reserves were estimated, primarily as a result
of a deterioration in the value of used cars. The Company also commuted a 2001
accident year aggregate stop loss reinsurance program in the second quarter of
2002, resulting in net written and net earned premium increasing by $3.6
million. The Company had not ceded any losses to the 2001 accident year
aggregate stop loss reinsurance program. The nine months ended September 30,
2001 included a $4.0 million increase to unpaid loss and loss adjustment
expenses arising from business interruption, business personal property,
business property and workers' compensation exposures relating to the September
11, 2001 terrorist attacks.

            Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $20.2 million (28.5%) to $91.2 million
for the nine months ended September 30, 2002 from $71.0 million for the same
period of 2001. This increase was due primarily to the 36.9% growth in net
earned premiums, offset in part by:

-     A lower weighted average effective commission rate incurred on the
      commercial and specialty lines segment products of 12.8% for the nine
      months ended September 30, 2002 compared to a weighted average effective
      commission rate of 13.4% for the nine months ended September 30, 2001. The
      Company has been able to incur a relatively lower commission rate on
      business produced by independent agents in the current market environment.

-     Incremental written premium growth without a corresponding incremental
      increase in operating leverage.

            Other Operating Expenses: Other operating expenses decreased $0.5
million to $4.6 million for the nine months ended September 30, 2002 from $5.1
million for the same period of 2001. The decrease in other operating expenses
was primarily due to the discontinuance of goodwill amortization effective
January 1, 2002. This decrease has been partially offset by an increase in
expenses attributable to increased operating activities.


                                       14
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                              FINANCIAL CONDITION
                                   (Continued)

            Income Tax Expense: The Company's effective tax rate for the nine
months ended September 30, 2002 and 2001 was 31.5% and 33.3%, respectively. The
effective rates differed from the 35% statutory rate principally due to
investments in tax-exempt securities and in part due to the discontinuance of
goodwill amortization. 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.

RESULTS OF OPERATIONS (THREE MONTHS ENDED SEPTEMBER 30, 2002 VS. SEPTEMBER 30,
2001)

            Premiums: Gross written premiums grew $73.3 million (53.4%) to
$210.5 million for the three months ended September 30, 2002 from $137.2 million
for the same period of 2001; gross earned premiums grew $34.7 million (30.3%) to
$149.3 million for the three months ended September 30, 2002 from $114.6 million
for the same period of 2001; net written premiums increased $65.0 million
(67.6%) to $161.2 million for the three months ended September 30, 2002 from
$96.2 million for the same period of 2001; and net earned premiums grew $28.3
million (36.4%) to $106.1 million in 2002 from $77.8 million in 2001.

The respective gross written premium increases for commercial lines, specialty
lines and personal lines segments for the three months ended September 30, 2002
vs. September 30, 2001 amount to $59.9 million (59.2%), $11.0 million (57.6%)
and $2.3 million, (13.9%) respectively. The overall growth in gross written
premiums is primarily attributable to the following:

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

-     The consolidation of certain competitor property and casualty insurance
      companies has led to the displacement of certain of their independent
      agency relationships. This consolidation continues to result in new agency
      relationship opportunities for the Company. These relationships have
      resulted in additional prospects and premium writings for the Company's
      commercial and specialty lines segments.

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

-     Rate increases realized on renewal business for the commercial lines
      segment, the specialty lines segment and the personal lines segment and
      increases in the number of policies written.

The respective net written premium increases (decreases) for commercial
lines, specialty lines and personal lines segments for the three months ended
September 30, 2002 vs. September 30, 2001 amount to $53.8 million (73.9%),
$11.4 million (68.2%) and ($0.2) million (2.7%) respectively. The differing
percentage increases (decreases) in net written premiums versus gross written
premiums for the period is primarily due to various changes in the Company's
reinsurance program. Additionally, during the three months ended September 30,
2002, as a result of utilizing the remaining reinsurance limit available to the
Company under a combined coverage reinsurance contract for its residual value
line of business, the ceded unearned premium reserve of $5.1 million related to
this reinsurance was fully amortized.

            Net Investment Income: Net investment income approximated $9.5
million for the three months ended September 30, 2002 and $8.2 million for the
same period of 2001. Total investments grew to $859.6 million at September 30,
2002 from $543.6 million at September 30, 2001. The growth in investment income
is due to investing net cash flows provided from operating activities and the
proceeds of the Company's fourth quarter 2001 equity offering. The capital
market environment of 2001 and the third quarter 2002 (low U.S. Treasury yields)
had the effect of increasing the level of prepayments in certain of the
Company's interest rate sensitive investments. Additionally, due to this capital
market environment, the Company has invested approximately $100 million in
floating rate and shorter amortizing securities to minimize interest rate risk
with the expectation of reinvesting these funds in longer duration investments
at higher future fixed income rates.


                                       15
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                              FINANCIAL CONDITION
                                   (Continued)

            Net Realized Investment Gain: Net realized investment gains were
$0.2 million for the three months ended September 30, 2002 and $0.5 million for
the same period in 2001. The Company realized net investment losses of $0.3
million from the sales of common stock equity securities and $0.8 million in net
investment gains from the sales of fixed maturity securities during the three
months ended September 30, 2002. Additionally, $0.3 million in non-cash realized
investment losses were recorded on certain securities as a result of the
Company's impairment evaluation. The Company realized net investment gains of
$0.5 million from the sales of fixed maturity securities during the three months
ended September 30, 2001.

            Other Income: Other income approximated $400,000 for the three
months ended September 30, 2002 and $105,000 for the same period of 2001. Other
income primarily consisted 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 not writing new business or renewing certain policies in designated areas of
Florida for the Company's manufactured housing product 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 $27.7 million (54.7%) to $78.3 million for the three months
ended September 30, 2002 from $50.6 million for the same period of 2001 and the
loss ratio increased to 73.8% in 2002 from 65.1% in 2001. This increase in net
loss and loss adjustment expenses was due principally to the 36.4% growth in net
earned premiums, and in part to the Company increasing loss and loss adjustment
expenses incurred by $27.0 million ($15.0 million net of reinsurance recover-
ables) as a result of changes in estimates of insured events in prior years.
Such adverse loss development is due to losses emerging at a higher rate on
automobile leases currently expiring on residual value policies than had been
originally anticipated when the reserves were estimated, primarily as a result
of the deterioration in the value of used cars. The three months ended September
30, 2001 included a $4.0 million increase to unpaid loss and loss adjustment
expenses arising from business interruption, business personal property,
business property and workers' compensation exposures relating to the September
11, 2001 terrorist attacks.

            Acquisition Costs and Other Underwriting Expenses: Acquisition costs
and other underwriting expenses increased $6.4 million (24.7%) to $32.3 million
for the three months ended September 30, 2002 from $25.9 million for the same
period of 2001. This increase was due primarily to the 36.4% growth in net
earned premiums, offset in part by:

-     A lower weighted average effective commission rate incurred on the
      commercial and specialty lines segment products of 12.3% for the three
      months ended September 30, 2002 compared to a weighted average effective
      commission rate of 13.1% for the three months ended September 30, 2001.
      The Company has been able to incur a relatively lower commission rate on
      business produced by independent agents in the current market environment.

-     Incremental written premium growth without a corresponding incremental
      increase in operating leverage.

            Other Operating Expenses: Other operating expenses increased $0.6
million to $1.6 million for the three months ended September 30, 2002 from $1.0
million for the same period of 2001. The increase in other operating expenses is
principally due to increased expenses attributable to operating activities,
partially offset by the discontinuance of goodwill amortization effective
January 1, 2002.

            Income Tax Expense: The Company's effective tax rate for the three
months ended September 30, 2002 and 2001 was 26.5% and 34.3%, respectively. The
effective rates differed from the 35% statutory rate principally due to
investments in tax-exempt securities and in part to the discontinuance of
goodwill amortization. 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.


                                       16
<PAGE>
            PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                              FINANCIAL CONDITION
                                   (Continued)

LIQUIDITY AND CAPITAL RESOURCES

            For the nine months ended September 30, 2002, the Company's
investments experienced unrealized investment appreciation of $9.5 million, net
of the related deferred tax expense of $5.1 million. At September 30, 2002, the
Company had total investments with a carrying value of $859.6 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 $163.5 million and
$89.0 million, respectively, for the nine months ended September 30, 2002 and
2001. Management believes that the Company has adequate ability 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 September 30, 2002 the insurance
subsidiaries' borrowing capacity was $92.9 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 $30.9 million at September 30, 2002 and bear interest at
adjusted LIBOR and mature twelve months from inception and are collateralized by
$35.6 million of the Company's fixed maturity securities. The weighted-average
interest rate on borrowings outstanding as of September 30, 2002 was 1.94%.

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

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 process of estimating loss
reserves; and (vi) catastrophe losses.

                                       17
<PAGE>
            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.

<TABLE>
<CAPTION>
                                                                SEPTEMBER 30, 2002
                                                             EXPECTED MATURITY DATES                                TOTAL
                                                   (In thousands, except average interest rate)                     FAIR
                               2002        2003        2004        2005        2006     Thereafter    TOTAL         VALUE
                             --------    --------    --------    --------    --------   ----------   --------    -----------
<S>                          <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
FIXED MATURITIES AVAILABLE
FOR SALE:

Principal Amount             $ 18,650    $ 67,830    $143,810    $115,380    $ 61,680    $381,940    $789,290    $   806,177

Book Value                   $ 18,670    $ 67,870    $144,750    $116,520    $ 61,520    $369,456    $778,786             --

Average Interest Rate            6.22%       5.17%       4.67%       4.81%       5.85%       5.29%       5.16%          4.16%

PREFERRED:

Principal Amount                   --    $  3,750    $  1,500    $  1,000    $  2,500          --    $  8,750    $     9,080

Book Value                         --    $  3,860    $  1,490    $  1,040    $  2,570          --    $  8,960             --

Average Interest Rate              --        5.90%       6.06%       6.84%       6.41%         --        6.18%          6.10%

SHORT-TERM INVESTMENTS:

Principal Amount             $ 45,050          --          --          --          --          --    $ 45,050    $    45,040

Book Value                   $ 45,040          --          --          --          --          --    $ 45,040             --

Average Interest Rate            1.60%         --          --          --          --          --        1.60%          1.60%

LOANS PAYABLE:

Principal Amount             $  2,500    $ 28,381          --          --          --          --    $ 30,881             --

Average Interest Rate            1.94%       1.94%         --          --          --          --        1.94%            --
</TABLE>


                                       18
<PAGE>
            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
<PAGE>
            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:

<TABLE>
<CAPTION>
Exhibit No.                                Description
----------      ----------------------------------------------------------------
<S>             <C>
10.1* (1)       Employment Agreement with James J. Maguire, effective June 1,
                2002

10.2* (1)       Employment Agreement with Christopher J. Maguire, effective June
                1, 2002


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
</TABLE>

*     Filed herewith.

(1)   Compensatory plan or arrangement.

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


                                       20
<PAGE>
                                   SIGNATURES

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

                                       PHILADELPHIA CONSOLIDATED HOLDING CORP.
                                       Registrant


Date November 13, 2002                 /s/ James J. Maguire, Jr.
     ------------------------          -----------------------------------------
                                       James J. Maguire, Jr.
                                       President and Chief Executive Officer
                                       (Principal Executive Officer)


Date November 13, 2002                 /s/ Craig P. Keller
     ------------------------          -----------------------------------------
                                       Craig P. Keller
                                       Senior Vice President, Secretary,
                                       Treasurer and Chief Financial Officer
                                       (Principal Financial and Accounting
                                       Officer)


                                       21
<PAGE>
                                  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: November 13, 2002           Signed: /s/ James J. Maguire, Jr.
     -------------------                 ---------------------------------------
                                  Name:  James J. Maguire, Jr.
                                         ---------------------------------------
                                  Title: President and Chief Executive Officer
                                         ---------------------------------------


                                       22
<PAGE>
                                  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: November 13, 2002                   Signed: /s/ Craig P. Keller
     ------------------------                    ------------------------------
                                          Name:  Craig P. Keller
                                                 -------------------------------
                                          Title: Chief Financial Officer
                                                 -------------------------------


                                       23