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A.M. Best Takes Various Rating Actions on Subsidiaries of Philadelphia Consolidated Holding Corporation.

OLDWICK, N.J. -- A.M. Best Co. has placed the financial strength ratings of A+ (Superior) of Philadelphia Indemnity Insurance Company (PIIC) and its affiliate, Philadelphia Insurance Company (PIC) (both of Bala Cynwyd, PA) under review with negative implications. Concurrently, A.M. Best has downgraded the financial strength ratings to A- (Excellent) from A+ (Superior) of Mobile USA Insurance Company (MUSA) and Liberty American Insurance Company (LAIC) (both of Pinellas, FL). These ratings have also been placed under review with negative implications. All four of the rated companies are subsidiaries of the parent holding company, Philadelphia Consolidated Holding Corporation (NASDAQ: PHLY) (Philadelphia, PA).

These rating actions take into consideration the significant impact of gross and net losses associated with the four major hurricanes that occurred during the third quarter 2004 and its effect on reinsurance recoverable balances, overall risk-adjusted capitalization and full year underwriting and operating results.

Additionally, these actions reflect the level of reinsurance credit risk borne by MUSA and LAIC and the potential impact on capitalization for these two companies following a subsequent catastrophic event.

Furthermore, these actions consider the planned termination of the existing inter-company pooling agreement by year-end and the effect on each member company. Management is presently in discussions with state insurance regulators on plans to replace the current four inter-company pools with two separate pooling agreements. Under this proposal, the two newly created pools would consist of the two Pennsylvania-based companies, PIIC and PIC, and the two Florida-based companies, MUSA and LAIC. A.M. Best plans to analyze the specifics of these new pooling agreements to determine what impact, if any, they will have on the financial strength ratings. Consequently, A.M. Best no longer views these companies on a "pooled" basis but rather evaluates each on a "stand-alone" basis considering each company's role within the group and the application of A.M. Best's group rating methodology.

The "under review" status signals the pending pooling agreement changes and the conclusion of any specific capital allocation/raising initiatives, which management plans to finalized sometime in fourth quarter 2004. These ratings will remain under review pending further discussions with management and until such time as the aforementioned issues are finalized.

The financial strength ratings of A+ (Superior) have been placed under review with negative implications for the following subsidiaries of Philadelphia Consolidated Holding Corporation:

--Philadelphia Indemnity Insurance Company

--Philadelphia Insurance Company

The financial strength ratings of A+ (Superior) have been downgraded to A- (Excellent) and placed under review with negative implications for the following subsidiaries of Philadelphia Consolidated Holding Corporation:

--Mobile USA Insurance Company

--Liberty American Insurance Company

For current Best's Ratings, independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, please visit

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at
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Publication:Business Wire
Geographic Code:1USA
Date:Nov 18, 2004
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