Criterios de diseño y Características de una plataforma TMN.

• In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”), which clarifi es that the term “fair value” is intended to represent a market- based measure, not an entity-specifi c measure, and gives the highest priority to quoted prices in active markets (Level 1 inputs) in determining fair value. SFAS No. 157 requires disclosures about (1) the extent to which companies measure assets and liabilities at fair value, (2) the methods and assumptions used to measure fair value, and (3) the effect of fair value measurements on earnings. SFAS No. 157 is effective for fi scal years beginning after November 15, 2007. We are currently in the process of evaluating the impact of SFAS No. 157; however, we anticipate that SFAS No. 157 will primarily impact the fair value measurement and disclosures of our investments in equity securities and fi xed maturities available for sale. Our initial assessment is as follows:

• The fair value of our investments in government securities and equity securities is primarily measured using a market based valuation methodology primarily using quoted market prices in active markets (Level 1 inputs per SFAS 157).

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• _{The fair value of our investments in the remainder of our fi xed}

maturities available for sale is primarily measured using a market based valuation methodology using primarily vendor pricing (Level 2 inputs per SFAS No. 157).

We do not currently anticipate that the adoption of SFAS No. 157 will have a material effect on our fi nancial position or the results of our operations.

• _{In February 2007, the FASB issued Statement No. 159, “The}

Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS No. 159”) which permits all entities the option to elect, at specifi ed election dates, to measure eligible fi nancial instruments at fair value. An entity must report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date, and recognize upfront costs and fees related to those items in earnings as incurred and not deferred. SFAS No. 159 applies to fi scal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157. An entity is prohibited from retrospectively applying SFAS No. 159, unless it chooses early adoption. SFAS No. 159 also applies to eligible items existing as of November 15, 2007 (or early adoption date). We are currently in the process of evaluating the impact of SFAS No. 159; however we do not currently anticipate electing the fair value option for any of our eligible fi nancial instruments.

• _{In December 2007, the FASB issued Statement No. 141R,}

“Business Combinations” (“SFAS No. 141R”), which revises the accounting for business combination transactions previously accounted for under SFAS No. 141, “Business Combinations”

(“SFAS No. 141”), and broadens the scope of transactions which should be accounted for under this standard. SFAS No. 141R retains the fundamental requirements of SFAS No. 141 in that the acquisition method of accounting is still used, and an acquirer must be identifi ed in all business combinations. SFAS No. 141R applies prospectively to business combinations which the acquisition date is on or after the beginning of the fi rst annual reporting period beginning on or after December 15, 2008. An entity is prohibited from applying SFAS No. 141R prior to that date. We are currently in the process of evaluating the impact of SFAS No. 141R.

• _{In December 2007, the FASB issued Statement No. 160,}

“Noncontrolling Interests in Consolidated Financial Statements. - an amendment of ARB No. 51” (“SFAS No. 160”), which establishes accounting and reporting standards for the non- controlling interests in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 requires that the ownership interests and the net income of the non-controlling interest be equally identifi ed from that of the parent on the face of the fi nancial statements. SFAS No. 160 also provides consistent accounting principles for changes in a parent controlling ownership interest in a subsidiary, and that any retained non-controlling fi nancial interests in a deconsolidated subsidiary be measured at fair value. SFAS No. 160 applies to fi scal years beginning on or after December 15, 2008, and is applied prospectively, except for presentation and disclosure requirements, which are applied retrospectively for all periods presented. We are currently in the process of evaluating the impact of SFAS No. 160.

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PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

As of December 31,

(In thousands, except share data) 2007 2006

ASSETS

Investments:

Fixed Maturities Available for Sale at Market

(Amortized Cost $2,639,471 and $2,136,231) $ 2,659,197 $ 2,129,609

Equity Securities at Market (Cost $322,877 and $259,184) 356,026 304,033

Total Investments 3,015,223 2,433,642

Cash and Cash Equivalents 106,342 108,671

Accrued Investment Income 24,964 20,083

Premiums Receivable 378,217 346,836

Prepaid Reinsurance Premiums and Reinsurance Receivables 280,110 272,798

Deferred Income Taxes 42,855 26,657

Deferred Acquisition Costs 184,446 158,805

Property and Equipment, Net 26,330 26,999

Other Assets 41,451 44,046

Total Assets $ 4,099,938 $ 3,438,537

LIABILITIES AND SHAREHOLDERS’ EQUITY

Policy Liabilities and Accruals:

Unpaid Loss and Loss Adjustment Expenses $ 1,431,933 $ 1,283,238

Unearned Premiums 847,485 759,358

Total Policy Liabilities and Accruals 2,279,418 2,042,596

Premiums Payable 97,674 66,827

Other Liabilities 175,373 161,847

Total Liabilities 2,552,465 2,271,270

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, 72,087,287 and 70,848,482

Shares Issued and Outstanding 423,379 376,986

Notes Receivable from Shareholders (19,595) (17,074)

Accumulated Other Comprehensive Income 34,369 24,848

Retained Earnings 1,109,320 782,507

Total Shareholders’ Equity 1,547,473 1,167,267

Total Liabilities and Shareholders’ Equity $ 4,099,938 $ 3,438,537

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For the Years Ended December 31,

(In thousands, except share and per share data) 2007 2006 2005

REVENUE:

Net Earned Premiums $ 1,379,243 $ 1,169,302 $ 976,647

Net Investment Income 117,224 91,699 63,709

Net Realized Investment Gain (Loss) 29,566 (9,861) 9,609

Other Income 3,561 2,630 1,464

Total Revenue 1,529,594 1,253,770 1,051,429

LOSSES AND EXPENSES:

Loss and Loss Adjustment Expenses 678,759 497,288 711,706

Net Reinsurance Recoveries (59,806) (29,076) (207,700)

Net Loss and Loss Adjustment Expenses 618,953 468,212 504,006

Acquisition Costs and Other Underwriting Expenses 413,103 338,267 263,759

Other Operating Expenses 12,241 12,637 17,124

Goodwill Impairment Loss — — 25,724

Total Losses and Expenses 1,044,297 819,116 810,613

Income Before Income Taxes 485,297 434,654 240,816

INCOME TAX EXPENSE (BENEFIT):

Current 179,808 155,404 89,510

Deferred (21,324) (9,599) (5,382)

Total Income Tax Expense 158,484 145,805 84,128

Net Income $ 326,813 $ 288,849 $ 156,688

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Holding Gain (Loss) Arising during Year $ 28,739 $ 21,140 $ (16,252)

Reclassifi cation Adjustment (19,218) 6,410 (6,246)

Other Comprehensive Income (Loss) 9,521 27,550 (22,498)

Comprehensive Income $ 336,334 $ 316,399 $ 134,190

PER AVERAGE SHARE DATA:

Net Income – Basic $ 4.64 $ 4.14 $ 2.29

Net Income – Diluted $ 4.40 $ 3.93 $ 2.14

Weighted-Average Common Shares Outstanding 70,381,631 69,795,947 68,551,572

Weighted-Average Share Equivalents Outstanding 3,845,044 3,674,121 4,533,807

Weighted-Average Shares and Share Equivalents Outstanding 74,226,675 73,470,068 73,085,379

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

Consolidated Statements of Operations