Estudio del tráfico

The following table sets forth a reconciliation of beginning and ending reserves for unpaid loss and loss adjustment expenses, net of amounts for reinsured losses and loss adjustment expenses, for the years indicated.

Net loss and loss adjustment expenses: As of and for the years ended December 31,

(In thousands) 2007 2006 2005

Unpaid loss and loss adjustment expenses at beginning of year $ 1,283,238 $ 1,245,763 $ 996,667

Less: reinsurance receivables 187,809 304,768 324,948

Net unpaid loss and loss adjustment expenses at beginning of year 1,095,429 940,995 671,719 Provision for losses and loss adjustment expenses for current year claims 704,734 559,647 533,906 Decrease in estimated ultimate losses and loss adjustment

expenses for prior year claims (85,781) (91,435) (29,900)

Total incurred losses and loss adjustment expenses 618,953 468,212 504,006

Loss and loss adjustment expense payments for claims attributable to:

Current year 180,798 118,845 110,496

Prior years (1)(2) 271,669 194,933 124,234

Total payments 452,467 313,778 234,730

Net unpaid loss and loss adjustment expenses at end of year 1,261,915 1,095,429 940,995

Plus: reinsurance receivables 170,018 187,809 304,768

Unpaid loss and loss adjustment expenses at end of year $ 1,431,933 $ 1,283,238 $ 1,245,763

(1) _{During the year ended December 31, 2005, net loss and loss adjustment expense payments for claims attributable to prior years are lower by $64.3 million due to the Company’s commutation of}

its 2003 Whole Account Net Quota Share Reinsurance Agreement.

(2) _{During the year ended December 31, 2006, net loss and loss adjustment expense payments for claims attributable to prior years are lower by $31.9 million due to the Company’s commutation of}

49

2007 ANNUAL REPOR

T

During 2007, the Company increased/(decreased) the estimated net unpaid loss and loss adjustment expenses for accident years 2006 and prior by the following amounts:

Net Basis Loss and Loss Adjustment Expenses Increase (Decrease)

Professional/

Management

(In millions) Commercial Liability Rental/Leasing

Accident Year Coverages Coverages Auto Coverages Other Total

2006 $ (10.6) $ (10.8) $ (0.8) $ (0.5) $ (22.7)

2005 $ (8.4) $ (15.1) $ (1.3) $ (0.2) $ (25.0)

2004 $ (6.0) $ (10.1) $ (3.1) $ 0.1 $ (19.1)

2003 & Prior $ (6.0) $ (10.8) $ (3.1) $ 0.9 $ (19.0)

Total $ (31.0) $ (46.8) $ (8.3) $ 0.3 $ (85.8)

Net Basis Loss and Loss Adjustment Expenses Increase (Decrease)

Professional/

Management

(In millions) Commercial Liability Rental/Leasing

Accident Year Coverages Coverages Auto Coverages Other Total

2005 $ (52.0) $ (5.0) $ (1.0) $ (1.2) $ (59.2)

2004 $ (11.6) $ 1.9 $ (2.8) $ (0.1) $ (12.6)

2003 $ (0.3) $ (6.8) $ (3.7) $ (0.2) $ (11.0)

2002 & Prior $ (1.0) $ (1.6) $ (6.3) $ 0.3 $ (8.6)

Total $ (64.9) $ (11.5) $ (13.8) $ (1.2) $ (91.4) The changes in the estimated net unpaid loss and loss adjustment

expenses for the prior accident years during 2007 were primarily attributable to the following:

• For accident year 2006, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower estimates for:

• Commercial property, professional liability, and commercial automobile coverages due to better than expected case incurred loss development, primarily as a result of both claim frequency and severity emergence being less than anticipated, and

• Management liability coverages due to better than expected case incurred loss development primarily as a result of claim severity emergence being less than anticipated.

• For accident year 2005, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for:

• Professional liability and management liability coverages due to better than expected case incurred loss development primarily as a result of claim severity being less than anticipated.

• General liability and commercial automobile and commercial property coverages due to better than expected case incurred loss development, primarily as a result of both claim frequency and severity emergence being less than anticipated.

The changes in the estimated net unpaid loss and loss adjustment expenses for prior year accident years during 2006 were primarily attributable to the following:

For accident year 2005, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower estimates for commercial coverages due to better than expected case incurred loss development resulting from less than

anticipated incurred frequency emergence on general liability coverages, and less than anticipated severity emergence on property and auto coverages.

For accident year 2004, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower estimates for commercial coverages due to better than expected case incurred loss development resulting from less than

anticipated incurred frequency emergence on general liability coverages, and less than anticipated incurred severity emergence on auto coverages.

For accident year 2003, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower estimates for professional liability coverages and rental/leasing auto coverages due to better than expected case incurred loss

• For accident year 2004, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for:

• Professional liability, commercial general liability, rental leasing and management liability coverages due to better than expected case incurred loss development primarily as a result of claim severity emergence being less than anticipated.

• For accident year 2003 and prior, the decrease in estimated net unpaid loss and loss adjustment expenses was principally due to lower loss estimates for:

• Professional liability and management liability coverages due to better than expected case incurred loss development primarily as a result of claim severity emergence being less than anticipated.

• Commercial general liability coverages due to better than expected case incurred loss development primarily as a result of both claim frequency and severity emergence being less than anticipated.

During 2006, the Company decreased the estimated net unpaid loss and loss adjustment expenses for accident years 2005 and prior by the following amounts:

50

2007 ANNUAL REPOR

T

PHILADELPHIA CONSOLIDATED HOLDING CORP. AND SUBSIDIARIES

than expected case incurred loss development resulting from less than anticipated incurred frequency emergence on rental/leasing auto coverages, and less than anticipated incurred severity emergence on rental supplemental liability coverages.