PHILADELPHIA INDEMNITY INSURANCE COMPANY TOKIO MARINE SPECIALTY INSURANCE COMPANY

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PHILADELPHIA INSURANCE COMPANIES

PHILADELPHIA INDEMNITY INSURANCE COMPANY

A++

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Associated With: Tokio Marine Holdings, Inc.

PHILADELPHIA INSURANCE COMPANIES

One Bala Plaza, Suite 100, Bala Cynwyd, PA 19004-1403

Web: www.phly.com

Tel: 610-617-7900 Fax: 610-617-7940 AMB#: 018667

Associated Ultimate Parent#: 058633

RATING RATIONALE

Rating Rationale: The ratings apply to Philadelphia Indemnity Insurance Company and Tokio Marine Specialty Insurance Company, which participate in an intercompany reinsurance pooling agreement and are collectively referred to as Philadelphia Insurance Companies. The ratings reflect Philadelphia Insurance Companies’ superior operating profitability, strong capitalization, and excellent market presence within the specialty commercial marketplace. The ratings also recognize the strategic importance of the group to its ultimate parent, Tokio Marine Holdings, Inc. (TMHD), as the group plays an important and strategic role in supporting TMHD’s global expansion strategy. Somewhat offsetting these favorable factors are the company’s susceptibility to natural catastrophe or terrorism losses and the growth in top-line premium in recent years that is expected to continue over the near term and which may pose unanticipated adverse outcomes. Also, the group’s business profile is specialty lines insurance with a focus on underserved niche markets, which compels the organization to identify and evaluate new opportunities frequently.

Results have historically outperformed the commercial casualty industry composite in both underwriting and operating results, driven by a focused niche market strategy, energized marketing style, highly disciplined underwriting and successful risk selection. Long-standing relationships with core producers, including preferred agents that have the opportunity to earn profit sharing with the favorable performance of their portfolio, have played an important role in the success of the group. Adherence to underwriting guidelines, a commitment to pricing integrity and advanced enterprise risk management integration have also helped continue to drive the generation of operating earnings.

A.M. Best believes that the members of the group are well positioned at the current ratings. Looking forward, negative rating action could occur with a substantial decline in operating performance or a loss of risk-adjusted capital from a significant catastrophic loss. The ratings can also be negatively impacted by any negative rating actions on its parent, Tokio Marine & Nichido Fire Insurance Co., Ltd., and/or a change in support from or relationship with TMHD.

RATING UNIT MEMBERS

Philadelphia Insurance Companies (AMB# 018667):

AMB# COMPANY BEST’SFSR POOL %

003616 Philadelphia Indemnity Ins Co A++ 95.00

000763 Tokio Marine Specialty Ins Co A++ 5.00

KEY FINANCIAL INDICATORS ($000)

————————————Statutory Data———————————— Period Ending Direct Premiums Written Net Premiums Written Pre-tax Operating

Income IncomeNet

Total Admitted Assets Policy-holders’ Surplus 2010 2,119,286 1,969,363 358,274 262,898 5,298,449 1,922,522 2011 2,158,988 2,034,538 188,633 165,027 5,794,756 1,992,715 2012 2,390,025 2,236,607 332,350 243,938 6,428,455 2,158,000 2013 2,649,278 2,475,231 424,554 310,815 6,942,157 2,314,009 2014 2,901,637 2,687,648 448,268 323,574 7,647,206 2,511,312

——Profitability—— ———Leverage——— ——Liquidity—— Period Ending Comb. Ratio Inv. Yield (%) Pre-tax ROR (%) NA Inv Lev NPW to PHS Net Lev. Overall Liq. (%) Oper. Cash flow (%) 2010 89.6 4.0 18.6 0.6 1.0 2.8 157.0 138.8 2011 99.5 3.9 9.4 1.0 1.0 2.9 152.5 136.3 2012 92.1 3.8 15.6 0.3 1.0 3.0 150.6 134.8 2013 89.8 3.6 17.8 1.5 1.1 3.1 150.0 133.0 2014 90.3 3.6 17.3 17.0 1.1 3.1 148.9 135.4 5-Yr 92.1 3.7 15.9 … … … … …

(*) Within several financial tables of this report, this company is compared against the Commercial Casualty Composite.

(*) Data reflected within all tables of this report has been compiled through the A.M. Best Consolidation of statutory filings.

BUSINESS PROFILE

Philadelphia Insurance Companies (the “group”) consists of Philadelphia Indemnity Insurance Company (PIIC) and Tokio Marine Specialty Insurance Company (TMSIC) (formerly Philadelphia Insurance Company). Both companies are direct subsidiaries of Philadelphia Consolidated Holding Corp. (Philadelphia Consolidated). Effective December 1, 2008, Philadelphia Consolidated was acquired by Tokio Marine Holdings, Inc. (TMHD), through TMHD’s wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF). TMNF was founded in 1879, and is the oldest and largest property and casualty insurer in Japan. On March 31, 2012, TMNF contributed 100% of the outstanding shares of Philadelphia Consolidated to Tokio Marine North America, Inc. (TMNA), an insurance holding company domiciled in the State of Delaware and a wholly owned direct subsidiary of TMNF.

PIIC is a Pennsylvania-domiciled property and casualty insurance company with licenses in 50 states and the District of Columbia. TMSIC is a Delaware-domiciled property and casualty insurance company approved for

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excess and surplus lines business in 49 states, the District of Columbia and the U.S. Virgin Islands. TMSIC’s business plan focuses on underwriting the group’s niche products on a surplus lines basis in those jurisdictions in which the products are not offered on an admitted basis. PIIC and TMSIC proportionately share all premium, losses and expenses on a pro rata basis, under the terms of an intercompany reinsurance pooling agreement. The pooling percentages of PIIC and TMSIC are 95% and 5%, respectively.

The group designs, markets and underwrites specialty commercial property and casualty and professional liability insurance products tailored for the unique exposures of niche markets, providing competitively priced policies, local service relationships, and differentiated coverage features. The group’s products include commercial multi-peril package insurance targeting specialized niches, including among others, non-profit organizations, condominium associations, private, vocational and specialty schools, religious organizations, day-care facilities, recreation and outdoor products industry, and health and fitness centers. Other products include commercial automobile insurance, property insurance for large commercial accounts, inland marine products targeting larger risks such as miscellaneous property floaters, and select classes of professional liability and management liability products. During 2011, the group launched a surety division that began offering surety bonds for contractors, sub-contractors, and others in the construction industry as well as other selective commercial surety bonds. In 2012, the group launched an excess and surplus lines division. New products are developed annually to complement those that become more mature and competitive. These also take advantage of emerging exposures and developing or changing market niches.

A select group of approximately 364 “preferred agents” and a broader network of approximately 18,000 independent producers complement the group’s approximately 140 marketing professionals located in 49 regional and field offices across 13 regions covering the United States. The group’s distribution model integrates proactive risk selection into the underwriting process via direct contact with the business prospect and/or policyholder.

TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS Period

Ending

———DPW——— —Prem Assumed—Reinsurance —Prem Ceded—Reinsurance ($000) (% Chg) ($000) (% Chg) ($000) (% Chg) 2010 2,119,286 5.4 3,011 -49.6 152,934 9.6 2011 2,158,988 1.9 9,160 204.2 133,611 -12.6 2012 2,390,025 10.7 4,563 -50.2 157,981 18.2 2013 2,649,278 10.8 5,879 28.8 179,925 13.9 2014 2,901,637 9.5 6,585 12.0 220,575 22.6 5-Yr CAGR … 7.6 … 2.0 … 9.6 Period Ending ————NPW———— ————NPE———— ($000) (% Chg) ($000) (% Chg) 2010 1,969,363 4.9 1,923,602 7.1 2011 2,034,538 3.3 2,014,022 4.7 2012 2,236,607 9.9 2,123,997 5.5 2013 2,475,231 10.7 2,383,677 12.2 2014 2,687,648 8.6 2,587,133 8.5 5-Yr CAGR … 7.4 … 7.6 2014 BY-LINE BUSINESS ($000) Reinsurance Reinsurance ———DPW——— —Prem Assumed— —Prem Ceded—

Product Line ($000) (%) ($000) (%) ($000) (%)

Com’l MultiPeril 1,532,203 52.8 … … 70,293 31.9

Comm’l Auto Liab 380,662 13.1 5,395 81.9 11,185 5.1

Oth Liab Occur 356,517 12.3 … … 49,125 22.3

Oth Liab CM 330,893 11.4 … … 24,173 11.0 Auto Physical 143,868 5.0 1,189 18.1 13,903 6.3 Surety 58,443 2.0 1 0.0 2,471 1.1 All Other 99,052 3.4 … … 49,423 22.4 Total 2,901,637 100.0 6,585 100.0 220,575 100.0 Business ———NPW——— Retention Product Line ($000) (%) (%) Com’l MultiPeril 1,461,909 54.4 95.4

Comm’l Auto Liab 374,871 13.9 97.1

Oth Liab Occur 307,392 11.4 86.2

Oth Liab CM 306,720 11.4 92.7 Auto Physical 131,154 4.9 90.4 Surety 55,973 2.1 95.8 All Other 49,629 1.8 50.1 Total 2,687,648 100.0 92.4 BY-LINE RESERVES ($000) Product Line 2014 2013 2012 2011 2010 Com’l MultiPeril 1,840,618 1,685,404 1,558,353 1,406,978 1,218,725 Comm’l Auto Liab 545,714 472,469 424,977 377,887 320,809 Oth Liab Occur 470,604 379,800 313,006 252,850 190,119 Oth Liab CM 415,808 462,572 453,063 424,596 367,528

Auto Physical 8,498 6,871 10,180 6,923 6,384

Surety 15,153 9,322 4,138 567 …

All Other 40,352 31,775 29,095 27,210 18,764

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GEOGRAPHIC BREAKDOWN BY DIRECT PREMIUM WRITINGS ($000)

2014 2013 2012 2011 2010 New York 401,085 362,833 321,690 281,844 263,612 California 381,290 348,270 321,587 298,503 287,627 Florida 181,529 165,318 143,988 121,235 110,548 Texas 180,062 162,022 147,069 140,815 141,666 Pennsylvania 169,955 150,956 139,109 126,956 118,753 New Jersey 129,606 115,067 98,451 93,518 94,644 Massachusetts 127,755 114,553 100,898 91,448 87,421 Illinois 83,631 76,400 70,352 62,300 62,538 Washington 66,485 60,216 57,809 51,699 51,619 Connecticut 66,326 61,887 53,720 44,456 45,278 All Other 1,113,914 1,031,755 935,353 846,216 855,580 Total 2,901,637 2,649,278 2,390,025 2,158,988 2,119,286 RISK MANAGEMENT

The Enterprise Risk Management (ERM) structure in place is extensive and well integrated with key risks identified and the specific committees or teams assigned to monitor and address each risk. It includes the establishment and maintenance of appropriate controls as respects to each risk category. The ERM structure is headed up by the executive management team with a specific ERM Committee overseeing both Corporate Governance and Departmental Functions. Each committee reports directly to the executive management team. The lead ERM Committee consists of the CEO, CFO, CIO, Chief Actuarial Officer and the director of internal audit. A separate Audit Committee reviews the activities/output of the ERM Committee. Every key risk has a risk-based “dashboard” that is available to management at all times. This dashboard details each key risk; denotes the perils or circumstances that could lead to the risk arising; quantifies the risk; and shows work in progress as far as addressing the risk.

Philadelphia’s ERM structure also is fully integrated with that of Tokio Marine. Dashboard calculations are consistent with Tokio Marine’s Standard Capital Modeling Manual. Philadelphia’s Dynamic Portfolio Optimization program is being evaluated and selectively implemented across other Tokio Marine Group companies. This is proving valuable with the east coast hurricane exposure determinations.

OPERATING PERFORMANCE

Operating Results: Excellent underwriting results and considerable investment income have produced consistently strong earnings over the past five years, generating pre-tax returns on revenue and surplus that consistently outpace those of the commercial casualty composite. An increasing earned premium base, driven by the expansion of the group’s marketing efforts on chosen niche classes of business and the introduction of new products, has led to annual underwriting income generation. Consistent underwriting and operating cash flows have facilitated growth in the invested asset base, providing the impetus for greater net investment income generation. In 2011, income production was dampened by higher than normal catastrophe losses.

Results have improved since that time primarily as a result of the annual reduction in catastrophe losses. A.M. Best expects the group to continue judiciously employing a strategy emphasizing growth in targeted niche areas. New product implementation and an organized, committed approach to prospecting should enable the group to further capitalize on its leadership position in the specialty commercial lines marketplace.

PROFITABILITY ANALYSIS ($000)

———————————Company——————————— Pre-tax After-tax

Period Operating Operating Net Total

Ending Income Income Income Return

2010 358,274 251,226 262,898 265,346 2011 188,633 143,306 165,027 164,980 2012 332,350 234,067 243,938 244,176 2013 424,554 309,009 310,815 310,093 2014 448,268 326,294 323,574 305,757 5-Yr Total 1,752,079 1,263,902 1,306,251 1,290,351 ————Company———— ——Industry Composite—— Period Pre-tax Return Operating Pre-tax Return Operating Ending ROR (%) on PHS (%) Ratio (%) ROR (%) on PHS (%) Ratio (%)

2010 18.6 14.4 80.7 11.1 9.4 88.1 2011 9.4 8.4 90.3 6.5 5.5 93.0 2012 15.6 11.8 82.8 7.6 7.7 91.5 2012 17.8 13.9 81.1 15.1 12.3 84.4 2014 17.3 12.7 81.6 13.1 11.2 86.6 5-Yr Avg 15.9 12.3 83.1 10.8 9.3 88.6

Underwriting Results: The group has posted excellent underwriting results over the past five years, with a loss ratio over that time that is far superior to that of the composite. In 2011, however, the group posted its highest loss ratio in over a decade as a result of a significant increase in catastrophe losses, and to a lesser extent smaller reserve releases than in previous years. Despite the impact of Superstorm Sandy, underwriting results in 2012, were greatly improved with the help of higher prior accident year reserve releases and lower catastrophe activity overall. Profitability returned to pre-2011 levels in 2013, primarily due to lower than normal catastrophe losses. Strictly defined niches, product innovation and individual account underwriting are the operational hallmarks that have led to the historically favorable results. The group’s consistent underwriting performance has been achieved despite some adverse loss reserve development on prior accident years, most recently on accident years 2010 and 2011. The group’s expense ratio remains on par with the composite, which also helps lead to a five-year combined ratio that is over than 10 percentage points more favorable than the composite average. A.M. Best believes the strong underwriting fundamentals will continue to provide opportunities to generate underwriting profits in the future.

The long-held philosophy of Philadelphia Insurance Companies is for the group to generate an underwriting profit on each line of business written. Individual account underwriting techniques have been established and strong risk management acumen helps bring about the consistency in underwriting results. Another factor influencing the favorable results in recent years is the

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group’s focused and disciplined market expansion. Additionally, the group’s marketing strategy has successfully utilized product differentiation and the maintenance of close customer contact with agents and insureds to cultivate long-term relationships. UNDERWRITING EXPERIENCE Period Ending Net Undrw Income ($000)

—Loss Ratios— —Expense Ratios— Ind Pure

Loss LAE Loss &LAE Comm.Net OtherExp. TotalExp. Div.Pol. Comb.Ratio Comb.Ratio 2010 187,211 49.5 10.5 60.0 16.3 13.3 29.6 … 89.6 104.4 2011 4,543 58.2 12.0 70.3 15.9 13.3 29.2 … 99.5 107.8 2012 133,744 52.3 10.5 62.8 16.5 12.9 29.4 … 92.1 105.7 2013 217,717 49.4 11.5 61.0 15.9 12.8 28.8 0.0 89.8 98.7 2014 223,205 50.0 11.5 61.5 15.7 13.0 28.7 0.0 90.3 99.1 5-Yr Total/Avg 766,420 51.7 11.2 63.0 16.0 13.1 29.1 … 92.1 103.0

BY-LINE LOSS RATIO

Product Line 2014 2013 2012 2011 2010 5-Yr Avg

Com’l MultiPeril 48.3 46.4 52.2 63.5 53.0 52.2

Comm’l Auto Liab 74.6 59.3 55.8 55.5 52.1 60.2

Oth Liab Occur 48.9 49.7 37.2 39.1 27.6 41.6

Oth Liab CM 33.0 51.7 56.7 57.1 49.7 49.7

Auto Physical 54.3 49.9 61.3 52.0 49.9 53.5

Surety 23.6 25.0 25.0 25.0 … 24.4

All Other 38.5 62.3 69.4 67.7 38.9 54.9

Total 50.0 49.4 52.3 58.2 49.5 51.7

DIRECT LOSS RATIO BY STATE

2014 2013 2012 2011 2010 5-Yr Avg New York 54.6 63.5 79.1 59.9 47.9 61.1 California 45.6 47.3 48.9 63.8 46.0 50.1 Florida 61.1 48.2 58.8 42.7 40.4 51.4 Texas 38.1 51.3 45.9 55.3 35.8 45.1 Pennsylvania 42.1 66.7 47.7 51.6 45.1 50.7 New Jersey 48.6 48.3 76.6 59.6 42.8 54.7 Massachusetts 37.1 49.2 28.2 58.7 35.7 41.6 Illinois 63.9 60.5 63.1 55.2 31.5 55.7 Washington 39.8 32.0 36.8 52.8 47.5 41.3 Connecticut 40.5 43.1 45.4 68.4 71.3 52.2 All Other 50.3 40.0 46.5 57.0 54.7 49.4 Total 49.0 48.1 52.6 57.4 48.3 50.9

Investment Results: Net investment income has grown annually over the past five years, as the group’s growing invested asset base has been strongly influenced by the increases in written premium. Generation of substantial operating cash flow is directly tied to the increased investment income. The increased concentration of invested assets in a portfolio emphasizing tax-exempt state and municipal bonds has resulted in a pre-tax investment yield below the composite average. The growth in invested assets has been consistent despite substantial levels of shareholder dividends paid annually to the parent organization.

INVESTMENT GAINS ($000)

——————————Company——————————

Net Realized Unrealized

Inv Capital Capital

Year Income Gains Gains

2010 170,856 11,672 2,448 2011 183,980 21,721 -47 2012 198,555 9,871 238 2013 206,812 1,806 -722 2014 224,678 -2,721 -17,817 5-Yr Total 984,881 42,348 -15,900

———————Company——————— Industry Composite Pre-tax

Invest

Inv Inc Inv Return on Total Inv Inc Inv Growth Yield Inv Assets Return Growth Yield

Year (%) (%) (%) (%) (%) (%) 2010 17.3 4.0 4.3 4.3 4.3 4.5 2011 7.7 3.9 4.3 4.2 -5.6 4.2 2012 7.9 3.8 4.0 3.9 0.5 4.1 2013 4.2 3.6 3.6 3.6 6.2 4.3 2014 8.6 3.6 3.5 3.2 -10.9 3.7 5-Yr Avg 8.7 3.7 3.9 3.8 -1.2 4.2

BALANCE SHEET STRENGTH

Capitalization: The group maintains strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Growth in surplus has largely kept pace with the increase in premium and loss reserves in recent years, resulting in fairly consistent net underwriting leverage measures that approximate the composite. Annual generation of retained earnings has been the driver of the group’s considerable surplus appreciation over the last decade. Recent growth in surplus has been constrained by shareholder dividends in four of the last five years as well as increased catastrophe losses. Annual dividends over the latest five years totaled $568 million, including extraordinary dividends of $158 million in both December 2014 and June 2013. Both underwriting and investment activities have contributed materially to the group’s organic earnings production.

Going forward, A.M. Best expects the group to pursue additional top-line growth resulting from expanded marketing efforts, the continued maturation of recently introduced products, along with the addition of new products. Other opportunities may be created by market dislocation where the group can utilize its ample and diverse distribution force to pursue these new business opportunities. A.M. Best expects the group’s capitalization to remain strong and comfortably supportive of the ratings.

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CAPITAL GENERATION ANALYSIS ($000) ————————Source of Surplus Growth————————

Pre-tax Realized Unrealized

Operating Capital Income Capital

Year Income Gains Taxes Gains

2010 358,274 11,672 107,048 2,448 2011 188,633 21,721 45,327 -47 2012 332,350 9,871 98,283 238 2013 424,554 1,806 115,545 -722 2014 448,268 -2,721 121,974 -17,817 5-Yr Total 1,752,079 42,348 488,177 -15,900

—————Source of Surplus Growth—————

Net Change % Chg

Contrib. Other in in

Year Capital Changes PHS PHS

2010 -100,000 5,989 171,334 9.8 2011 -100,000 5,214 70,194 3.7 2012 -100,000 21,109 165,285 8.3 2013 -158,000 3,916 156,009 7.2 2014 -110,000 1,546 197,303 8.5 5-Yr Total -568,000 37,774 760,125 7.5 QUALITY OF SURPLUS ($000)

Surplus Other Contributed Unassigned

Year Notes Debt Capital Surplus

2010 … … 452,134 1,470,387

2011 … … 457,351 1,535,365

2012 … … 413,488 1,744,512

2013 … … 413,488 1,900,521

2014 … … 413,488 2,097,824

Year-End Conditional Adjusted

Year PHS Reserves PHS 2010 1,922,522 524 1,923,046 2011 1,992,715 2,793 1,995,508 2012 2,158,000 1,513 2,159,513 2013 2,314,009 1,342 2,315,351 2014 2,511,312 1,678 2,512,990 LEVERAGE ANALYSIS Period Ending

—————Company———— ————Industry Composite———— NPW to

PHS Res.

to

PHS Lev.Net GrossLev. NPW toPHS Res.

to

PHS Lev.Net GrossLev.

2010 1.0 1.1 2.8 3.0 0.7 1.4 2.8 3.6

2011 1.0 1.3 2.9 3.1 0.8 1.5 3.0 3.8

2012 1.0 1.3 3.0 3.2 0.8 1.4 2.9 3.8

2013 1.1 1.3 3.1 3.2 0.8 1.4 3.0 3.7

2014 1.1 1.3 3.1 3.3 0.8 1.4 2.9 3.6

CEDED REINSURANCE ANALYSIS ($000)

Period Ending

——————Company—————— ——Industry Composite—— Ceded Reins. Total Bus. Ret. (%) Reins. Recov. to PHS (%) Ceded Reins. to PHS (%) Bus. Ret. (%) Reins. Recov. to PHS (%) Ceded Reins. to PHS (%) 2010 381,470 92.8 11.9 19.8 81.4 57.1 80.0 2011 350,918 93.8 10.9 17.6 81.8 59.1 84.6 2012 415,615 93.4 11.9 19.3 82.4 58.2 83.6 2013 403,383 93.2 8.8 17.4 82.7 53.9 78.3 2014 460,774 92.4 9.8 18.3 83.4 50.9 75.3 2014 REINSURANCE RECOVERABLES ($000) Paid & Unpaid Losses IBNR Unearned Premiums Other Recov* Total Reins Recov Foreign Affiliates... 4,305 14,015 8,711 506 27,537 US Insurers ... 42,827 79,725 47,515 … 170,067 Pools/Associations... 2,377 5,624 22,324 … 30,325 Other Non-US... 5,150 7,903 5,741 -31 18,763 Total (ex US Affils) ... 54,659 107,267 84,291 475 246,692

* Includes Commissions less Funds Withheld

Loss Reserves: The group has experienced favorable loss reserve development in each of the last ten calendar years, which has enhanced reported results. Over this period, accident year reserve development has been mixed as adverse development has been recorded in four of the last ten accident years. Most of the adverse development was experienced in the 2010 accident year, primarily attributable to worse than expected case incurred development mainly for the commercial multi-peril line of business, and to a lesser degree, the general liability occurrence line. The 2013 increase in estimated unpaid loss and loss adjustment expenses for the 2011 accident year was primarily attributable to higher than expected case incurred development mainly for the commercial multi-peril coverage, the commercial automobile liability coverage and the other liability occurrence line. However, this partially reversed with the subsequent evaluation of that year during 2014.The level of overall loss reserves has increased in recent years due to the continued growth in premium.

LOSS & ALAE RESERVE DEVELOP.: CALENDAR YEAR ($000) Calendar Year Orig. Loss Reserves Developed Reserves Thru ’14 Develop. to Orig. (%) Develop. to PHS (%) Develop. to NPE (%) Unpaid Reserves @12/14 Unpaid Res. to Develop. (%) 2009 1,697,695 1,468,895 -13.5 -13.1 81.8 197,483 13.4 2010 2,027,127 1,882,945 -7.1 -7.5 97.9 372,889 19.8 2011 2,367,935 2,259,819 -4.6 -5.4 112.2 691,202 30.6 2012 2,650,597 2,584,220 -2.5 -3.1 121.7 1,211,328 46.9 2013 2,888,083 2,862,432 -0.9 -1.1 120.1 2,021,080 70.6 2014 3,164,337 3,164,337 … … 122.3 3,164,337 100.0

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LOSS & ALAE RESERVE DEVELOP.: ACCIDENT YEAR ($000) Accident Year Orig. Loss Reserves Developed Reserves Thru ’14 Develop. to Orig. (%) Unpaid Reserves @12/14 Acc. Yr Loss Ratio Acc. Yr Comb. Ratio 2009 708,039 662,432 -6.4 95,157 55.6 84.5 2010 817,897 865,996 5.9 175,406 64.8 94.4 2011 951,286 951,452 0.0 318,313 71.3 100.5 2012 998,559 990,853 -0.8 520,126 65.1 94.5 2013 1,064,972 1,082,953 1.7 809,752 62.9 91.7 2014 1,143,257 1,143,257 … 1,143,257 63.6 92.4

Liquidity: Solid current and overall liquidity has been maintained at levels that exceed the industry composite averages. The group’s liquidity reflects increased premium collections and considerable operating cash flow generated annually. The membership of the group’s two operating companies with the Federal Home Loan Bank of Pittsburgh (FHLB) provides an additional source of liquidity, if needed. The companies are able to utilize established borrowing capacity, based on their FHLB-eligible level of collateral. As of December 31, 2014, the unused borrowing capacity was $523.1 million, which provides an immediately available line of credit. As of the same date, there were no borrowings outstanding with the FHLB.

LIQUIDITY ANALYSIS

Period Ending

—————Company————— ————Industry Composite———— Quick

Liq. (%) Liq. (%)Current Liq. (%)Overall Gross Agents Bal.

to PHS (%) Liq. (%)Quick Liq. (%)Current Liq. (%)Overall Gross Agents Bal. to PHS (%) 2010 16.3 136.1 157.0 4.4 21.2 104.0 147.0 8.8 2011 13.0 133.9 152.5 4.1 20.1 102.2 145.2 10.1 2012 12.4 131.7 150.6 3.3 22.0 100.8 145.6 10.8 2013 7.3 130.4 150.0 5.4 22.8 102.4 145.7 10.6 2014 9.9 127.4 148.9 5.3 24.0 103.4 147.5 10.2

CASH FLOW ANALYSIS ($000)

—————————Company————————— Industry Composite Underw Oper Net Underw Oper Underw Oper

Cash Cash Cash Cash Cash Cash Cash

Year Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%) 2010 555,913 598,841 17,343 139.8 138.8 96.4 108.7 2011 403,322 593,931 -35,837 124.9 136.3 96.2 107.3 2012 542,498 629,369 105,908 132.7 134.8 99.4 112.9 2013 506,192 651,491 -74,998 127.0 133.0 107.2 118.7 2014 596,823 759,929 29,416 129.2 135.4 103.0 113.4 5-Yr Total 2,604,749 3,233,562 41,832 … … … …

Investments: Invested assets represent over 88% of total admitted assets. Non-invested assets are primarily comprised of uncollected agent’s premium balances generated by the increase in premiums. During 2009, the group liquidated its common stock portfolio with the only equities remaining being those that are in concert with its FHLB investment. With the liquidation of the equity portfolio, long-term fixed income holdings comprise more than 98% of invested assets, underscoring the traditionally conservative investment

strategy of the group. As of year-end 2014, equity investment leverage remained below 4%.

INVESTMENT LEVERAGE ANALYSIS (% OF PHS)

Period Ending

—————————Company————————— —Composite—Industry Class 3-6 Bonds Real Estate/ Mtg. Other Invested

Assets CommonStocks

Non-Affil. Inv. Lev. Affil.Inv.

Class 3-6 Bonds CommonStocks

2010 0.0 … … 0.6 0.6 … 6.9 9.3 2011 0.5 … … 0.5 1.0 … 7.0 9.8 2012 … … … 0.3 0.3 … … 10.5 2013 0.2 … 1.2 0.2 1.5 … 7.4 14.7 2014 6.6 0.9 5.7 3.9 17.0 0.5 7.7 15.9 INVESTMENTS - SECURITIES Current Year Distribution of Bonds By Maturity

————————Years———————— Yrs-Avg

0-1 1-5 5-10 10-20 20+ Maturity

Government 0.9 1.4 1.4 0.7 0.0 6

Gov’t Agencies & Muni 3.6 22.4 24.5 8.0 6.3 8

Industrial & Misc 1.3 13.2 13.4 0.7 1.4 6

Hybrid Securities … 0.1 0.3 … 0.4 16 Total 5.8 37.1 39.6 9.3 8.2 8 2014 2013 2012 2011 2010 Bonds (000) 6,264,686 5,946,239 5,460,932 5,032,804 4,504,060 US Government 3.1 1.5 3.1 4.0 8.0 Foreign Government 0.6 0.9 0.9 1.0 1.2

Foreign - All Other 4.7 2.4 2.8 2.0 2.4

State/Special Revenue - US 65.3 76.9 78.7 80.6 76.9 Industrial & Misc - US 26.4 18.3 14.6 12.3 11.5

Private Issues 12.9 6.1 2.8 2.0 1.5 Public Issues 87.1 93.9 97.2 98.0 98.5 Bond Quality (%) 2014 2013 2012 2011 2010 Class 1 91.9 96.3 96.7 97.2 97.1 Class 2 5.5 3.6 3.3 2.6 2.8 Class 3 1.1 0.1 … … … Class 4 1.0 … … … … Class 5 0.5 … … 0.2 … Class 6 0.1 … … … 0.0 INVESTMENTS - EQUITIES 2014 2013 2012 2011 2010 Stocks (000) 157,098 3,840 6,461 9,068 11,134 Unaffiliated Common 62.2 100.0 100.0 100.0 100.0 Unaffiliated Preferred 37.8 … … … …

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INVESTMENTS - MORTGAGE LOANS & REAL ESTATE

2014 2013 2012 2011 2010

Mortgage Loans &

Real Estate (000) 21,402 … … … …

Mortgage Loans 100.0 … … … …

INVESTMENTS - OTHER INVESTED ASSETS

2014 2013 2012 2011 2010

Other Inv Assets (000) 206,874 47,987 96,334 -8,974 26,937

Cash 4.3 -58.8 18.9 936.8 -54.5

Short-Term 20.1 103.0 81.0 -99.9 151.6

Schedule BA Assets 74.7 55.6 … … …

All Other 0.8 0.2 0.1 -8.1 3.0

REINSURANCE

Under its casualty treaty, the group retains the first $3.0 million primary layer of liability on each occurrence and maintains reinsurance coverage up to $21.0 million provided in two layers — $13.0 million in excess of $3.0 million and $5.0 million in excess of $16.0 million. This coverage is placed with a 20% co-participation being retained. Facultative reinsurance coverage (on an individual risk basis) is purchased for casualty risks in excess of $21.0 million. An excess clash casualty reinsurance agreement provides an additional $15.0 million of coverage in excess of a $5.0 million retention for protection from exposures such as extra-contractual obligations and judgments in excess of policy limits.

The group retains the first $5.0 million layer on its property risks plus an additional $5.0 million annual aggregate deductible, with its reinsurers bearing liability up to $95.0 million excess of the retention. The first property layer ($5.0 million in excess of $5.0 million and in excess of the $5.0 million annual aggregate deductible) is placed with a 50% co-participation being retained, whereas the remaining $90.0 million of coverage is 100% placed. Automatic facultative reinsurance coverage is provided on each commercial property risk with limits in excess of $100.0 million up to $150.0 million, except for risks located in Florida, Hawaii or Harris County, Texas, where coverage is provided for property losses in excess of $100.0 million up to $130.0 million. The property per risk excess of loss treaties also provide a $95.0 million aggregate policy limit for terrorism exposure in excess of a $5.0 million retention. The automatic facultative facility provides terrorism coverage for $50 million in the aggregate.

Catastrophe reinsurance is maintained in excess of a $100.0 million per occurrence retention up to $500.0 million. On the first excess layer of the catastrophe contract ($150.0 million in excess of $100.0 million applicable to losses occurring nationwide), the group retains a 5% co-participation. This layer is shared with an affiliate, First Insurance Company of Hawaii, whose risk exposure is in Hawaii only. The second excess layer of the catastrophe contract ($200.0 million in excess of $250.0 million applicable also to losses occurring nationwide), is 100% placed and is also shared with First Insurance Company of Hawaii. The top layer of the catastrophe program ($50.0 million

in excess of $450 million applicable to losses occurring in the Northeast only), is also 100% placed. This layer is not shared with any affiliates.

CONSOLIDATED BALANCE SHEET

(at December 31, 2014) ADMITTED ASSETS ($000) 12/31/14 12/31/13 ’14% ’13% Bonds ... 6,264,686 5,946,239 81.9 85.7 Preferred stock ... 59,414 … 0.8 … Common stock... 97,685 3,840 1.3 0.1 Cash & short-term invest ... 50,626 21,209 0.7 0.3 Other non-affil inv asset ... 165,115 26,778 2.2 0.4 Investments in affiliates ... 12,535 … 0.2 … Total invested assets... 6,650,061 5,998,066 87.0 86.4 Premium balances ... 714,741 662,147 9.3 9.5 Accrued interest ... 69,177 65,077 0.9 0.9 All other assets... 213,227 216,867 2.8 3.1 Total assets... 7,647,206 6,942,157 100.0 100.0

LIABILITIES & SURPLUS ($000)

12/31/14 12/31/13 ’14% ’13% Loss & LAE reserves ... 3,336,748 3,048,214 43.6 43.9 Unearned premiums... 1,326,384 1,225,870 17.3 17.7 Conditional reserve funds ... 1,678 1,342 0.0 0.0 All other liabilities ... 471,084 352,722 6.2 5.1 Total liabilities ... 5,135,894 4,628,148 67.2 66.7 Capital & assigned surplus... 413,488 413,488 5.4 6.0 Unassigned surplus... 2,097,824 1,900,521 27.4 27.4 Total policyholders’ surplus... 2,511,312 2,314,009 32.8 33.3 Total liabilities & surplus... 7,647,206 6,942,157 100.0 100.0

CONSOLIDATED SUMMARY OF 2014 OPERATIONS ($000) Statement of Income 12/31/14

Funds Provided from

Operations 12/31/14

Premiums earned... 2,587,133 Premiums collected... 2,643,174 Losses incurred ... 1,293,807

Benefit & loss-related pmts

1,080,411 LAE incurred ... 298,046

Undrw expenses incurred

771,936 LAE & undrw expenses paid 965,801 Div to policyholders ... 140 Div to policyholders ... 139 Net underwriting income 223,205 Undrw cash flow ... 596,823 Net investment income.... 224,678 Investment income... 262,736 Other income/expense ... 385 Other income/expense ... 385 Pre-tax oper income ... 448,268 Pre-tax cash operations 859,944 Realized capital gains... -2,721

Income taxes incurred ... 121,974 Income taxes pd (recov) ... 100,015 Net income... 323,574 Net oper cash flow... 759,929

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——

♦

——

Ultimate Parent: Tokio Marine Holdings, Inc.

PHILADELPHIA INDEMNITY INSURANCE COMPANY

One Bala Plaza, Suite 100, Bala Cynwyd, PA 19004-1403

Web: www.phly.com

Tel: 610-617-7900 Fax: 610-617-7940

AMB#: 003616 NAIC#: 18058

Ultimate Parent#: 058633 FEIN#: 23-1738402 BEST’S CREDIT RATING

Best’s Financial Strength Rating: A++ Outlook: Stable Best’s Financial Size Category: XV

The company’s rating reflects its pooling arrangement with other pool members of the Philadelphia Insurance Companies (AMB# 018667).

RATING RATIONALE

The following text is derived from A.M. Best’s Credit Report on Philadelphia Insurance Companies (AMB# 018667).

Rating Rationale: The ratings apply to Philadelphia Indemnity Insurance Company and Tokio Marine Specialty Insurance Company, which participate in an intercompany reinsurance pooling agreement and are collectively referred to as Philadelphia Insurance Companies. The ratings reflect Philadelphia Insurance Companies’ superior operating profitability, strong capitalization, and excellent market presence within the specialty commercial marketplace. The ratings also recognize the strategic importance of the group to its ultimate parent, Tokio Marine Holdings, Inc. (TMHD), as the group plays an important and strategic role in supporting TMHD’s global expansion strategy. Somewhat offsetting these favorable factors are the company’s susceptibility to natural catastrophe or terrorism losses and the growth in top-line premium in recent years that is expected to continue over the near term and which may pose unanticipated adverse outcomes. Also, the group’s business profile is specialty lines insurance with a focus on underserved niche markets, which compels the organization to identify and evaluate new opportunities frequently.

Results have historically outperformed the commercial casualty industry composite in both underwriting and operating results, driven by a focused niche market strategy, energized marketing style, highly disciplined underwriting and successful risk selection. Long-standing relationships with core producers, including preferred agents that have the opportunity to earn profit sharing with the favorable performance of their portfolio, have played an important role in the success of the group. Adherence to underwriting guidelines, a commitment to pricing integrity and advanced enterprise risk

management integration have also helped continue to drive the generation of operating earnings.

A.M. Best believes that the members of the group are well positioned at the current ratings. Looking forward, negative rating action could occur with a substantial decline in operating performance or a loss of risk-adjusted capital from a significant catastrophic loss. The ratings can also be negatively impacted by any negative rating actions on its parent, Tokio Marine & Nichido Fire Insurance Co., Ltd., and/or a change in support from or relationship with TMHD.

FIVE-YEAR RATING HISTORY Date Best’s FSR Date Best’s FSR 06/04/15 A++ 09/19/11 A++ 05/08/14 A++ 07/09/10 A+ 02/28/13 A++

KEY FINANCIAL INDICATORS ($000)

————————————Statutory Data———————————— Period Ending Direct Premiums Written Net Premiums Written Pre-tax Operating Income Net Income Total Admitted Assets Policy-holders’ Surplus 2010 2,078,222 1,870,895 339,840 250,362 5,004,480 1,806,302 2011 2,124,704 1,932,811 178,311 154,959 5,462,757 1,867,005 2012 2,337,154 2,124,777 314,636 229,630 6,047,270 2,017,179 2013 2,547,303 2,351,470 401,939 293,493 6,526,061 2,156,714 2014 2,739,950 2,553,265 424,297 306,111 7,182,217 2,337,376

——Profitability—— ———Leverage——— ——Liquidity—— Period

Ending Comb.Ratio Inv. Yield (%) Pre-tax ROR (%) NA Inv Lev NPW to PHS Lev.Net Overall Liq. (%) Oper. Cash flow (%) 2010 89.6 4.0 18.6 0.6 1.0 2.8 156.5 138.5 2011 99.5 3.9 9.3 1.0 1.0 3.0 152.0 136.9 2012 92.1 3.8 15.6 0.3 1.1 3.0 150.1 135.2 2013 89.8 3.6 17.7 1.6 1.1 3.1 149.4 131.9 2014 90.3 3.6 17.3 18.3 1.1 3.2 148.3 135.2 5-Yr 92.1 3.8 15.8 … … … … …

(*) Within several financial tables of this report, this company is compared against the Commercial Casualty Composite.

(*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement.

BUSINESS PROFILE

Philadelphia Insurance Companies (the “group”) consists of Philadelphia Indemnity Insurance Company (PIIC) and Tokio Marine Specialty Insurance Company (TMSIC) (formerly Philadelphia Insurance Company). Both companies are direct subsidiaries of Philadelphia Consolidated Holding Corp. (Philadelphia Consolidated). Effective December 1, 2008, Philadelphia

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Consolidated was acquired by Tokio Marine Holdings, Inc. (TMHD), through TMHD’s wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF). TMNF was founded in 1879, and is the oldest and largest property and casualty insurer in Japan. On March 31, 2012, TMNF contributed 100% of the outstanding shares of Philadelphia Consolidated to Tokio Marine North America, Inc. (TMNA), an insurance holding company domiciled in the State of Delaware and a wholly owned direct subsidiary of TMNF.

PIIC is a Pennsylvania-domiciled property and casualty insurance company with licenses in 50 states and the District of Columbia. TMSIC is a Delaware-domiciled property and casualty insurance company approved for excess and surplus lines business in 49 states, the District of Columbia and the U.S. Virgin Islands. TMSIC’s business plan focuses on underwriting the group’s niche products on a surplus lines basis in those jurisdictions in which the products are not offered on an admitted basis. PIIC and TMSIC proportionately share all premium, losses and expenses on a pro rata basis, under the terms of an intercompany reinsurance pooling agreement. The pooling percentages of PIIC and TMSIC are 95% and 5%, respectively.

The group designs, markets and underwrites specialty commercial property and casualty and professional liability insurance products tailored for the unique exposures of niche markets, providing competitively priced policies, local service relationships, and differentiated coverage features. The group’s products include commercial multi-peril package insurance targeting specialized niches, including among others, non-profit organizations, condominium associations, private, vocational and specialty schools, religious organizations, day-care facilities, recreation and outdoor products industry, and health and fitness centers. Other products include commercial automobile insurance, property insurance for large commercial accounts, inland marine products targeting larger risks such as miscellaneous property floaters, and select classes of professional liability and management liability products. During 2011, the group launched a surety division that began offering surety bonds for contractors, sub-contractors, and others in the construction industry as well as other selective commercial surety bonds. In 2012, the group launched an excess and surplus lines division. New products are developed annually to complement those that become more mature and competitive. These also take advantage of emerging exposures and developing or changing market niches.

A select group of approximately 364 “preferred agents” and a broader network of approximately 18,000 independent producers complement the group’s approximately 140 marketing professionals located in 49 regional and field offices across 13 regions covering the United States. The group’s distribution model integrates proactive risk selection into the underwriting process via direct contact with the business prospect and/or policyholder.

TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS Period Ending ———DPW——— Reinsurance —Prem Assumed— Reinsurance —Prem Ceded— ($000) (% Chg) ($000) (% Chg) ($000) (% Chg) 2010 2,078,222 6.5 38,895 -35.7 246,223 8.1 2011 2,124,704 2.2 39,578 1.8 231,472 -6.0 2012 2,337,154 10.0 50,820 28.4 263,197 13.7 2013 2,547,303 9.0 107,337 111.2 303,170 15.2 2014 2,739,950 7.6 123,826 15.4 310,511 2.4 5-Yr CAGR … 7.0 … 15.4 … 6.4 Period Ending ————NPW———— ————NPE———— ($000) (% Chg) ($000) (% Chg) 2010 1,870,895 4.9 1,827,422 7.1 2011 1,932,811 3.3 1,913,321 4.7 2012 2,124,777 9.9 2,017,797 5.5 2013 2,351,470 10.7 2,264,493 12.2 2014 2,553,265 8.6 2,457,777 8.5 5-Yr CAGR … 7.4 … 7.6

Territory: The company is licensed in the District of Columbia and all states. 2014 BY-LINE BUSINESS ($000)

Reinsurance Reinsurance ———DPW——— —Prem Assumed— —Prem Ceded—

Product Line ($000) (%) ($000) (%) ($000) (%)

Com’l MultiPeril 1,502,939 54.9 28,152 22.7 142,278 45.8 Comm’l Auto Liab 379,509 13.9 6,546 5.3 29,927 9.6 Oth Liab Occur 280,955 10.3 59,215 47.8 48,148 15.5

Oth Liab CM 311,865 11.4 9,777 7.9 30,258 9.7 Auto Physical 132,423 4.8 1,425 1.2 9,252 3.0 Surety 58,443 2.1 1 0.0 5,270 1.7 All Other 73,816 2.7 18,710 15.1 45,379 14.6 Total 2,739,950 100.0 123,826 100.0 310,511 100.0 Business ———NPW——— Retention Product Line ($000) (%) (%) Com’l MultiPeril 1,388,814 54.4 92.4

Comm’l Auto Liab 356,128 13.9 92.5

Oth Liab Occur 292,022 11.4 91.2

Oth Liab CM 291,384 11.4 93.4

Auto Physical 124,596 4.9 93.3

Surety 53,174 2.1 91.0

All Other 47,147 1.8 52.7

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BY-LINE RESERVES ($000)

Product Line 2014 2013 2012 2011 2010

Com’l MultiPeril 1,748,587 1,601,134 1,480,433 1,336,629 1,157,788 Comm’l Auto Liab 518,428 448,846 403,733 358,993 304,769 Oth Liab Occur 447,074 360,810 297,357 240,207 180,612 Oth Liab CM 395,018 439,443 430,408 403,366 349,151 Auto Physical 8,073 6,527 9,670 6,577 6,065 Surety 14,396 8,856 3,932 539 … All Other 38,334 30,186 27,638 25,850 17,827 Total 3,169,910 2,895,803 2,653,173 2,372,161 2,016,213 GEOGRAPHIC BREAKDOWN BY

DIRECT PREMIUM WRITINGS ($000)

2014 2013 2012 2011 2010 New York 382,522 350,505 316,426 277,157 259,934 California 341,292 322,347 312,111 293,054 283,638 Florida 174,806 161,428 142,197 120,467 109,987 Texas 169,934 157,394 144,134 140,654 136,882 Pennsylvania 165,956 148,062 139,100 126,956 118,753 New Jersey 122,096 110,768 96,329 92,190 93,234 Massachusetts 120,982 109,631 97,428 89,484 86,303 Illinois 76,779 72,476 69,373 61,925 62,103 Washington 64,071 58,786 56,732 51,060 50,084 Connecticut 63,226 58,615 52,010 43,353 44,429 All Other 1,058,285 997,291 911,314 828,403 832,876 Total 2,739,950 2,547,303 2,337,154 2,124,704 2,078,222 RISK MANAGEMENT

The Enterprise Risk Management (ERM) structure in place is extensive and well integrated with key risks identified and the specific committees or teams assigned to monitor and address each risk. It includes the establishment and maintenance of appropriate controls as respects to each risk category. The ERM structure is headed up by the executive management team with a specific ERM Committee overseeing both Corporate Governance and Departmental Functions. Each committee reports directly to the executive management team. The lead ERM Committee consists of the CEO, CFO, CIO, Chief Actuarial Officer and the director of internal audit. A separate Audit Committee reviews the activities/output of the ERM Committee. Every key risk has a risk-based “dashboard” that is available to management at all times. This dashboard details each key risk; denotes the perils or circumstances that could lead to the risk arising; quantifies the risk; and shows work in progress as far as addressing the risk.

Philadelphia’s ERM structure also is fully integrated with that of Tokio Marine. Dashboard calculations are consistent with Tokio Marine’s Standard Capital Modeling Manual. Philadelphia’s Dynamic Portfolio Optimization program is being evaluated and selectively implemented across other Tokio

Marine Group companies. This is proving valuable with the east coast hurricane exposure determinations.

OPERATING PERFORMANCE

Operating Results: Excellent underwriting results and considerable investment income have produced consistently strong earnings over the past five years, generating pre-tax returns on revenue and surplus that consistently outpace those of the commercial casualty composite. An increasing earned premium base, driven by the expansion of the group’s marketing efforts on chosen niche classes of business and the introduction of new products, has led to annual underwriting income generation. Consistent underwriting and operating cash flows have facilitated growth in the invested asset base, providing the impetus for greater net investment income generation. In 2011, income production was dampened by higher than normal catastrophe losses. Results have improved since that time primarily as a result of the annual reduction in catastrophe losses. A.M. Best expects the group to continue judiciously employing a strategy emphasizing growth in targeted niche areas. New product implementation and an organized, committed approach to prospecting should enable the group to further capitalize on its leadership position in the specialty commercial lines marketplace.

PROFITABILITY ANALYSIS ($000)

———————————Company——————————— Pre-tax After-tax

Period Operating Operating Net Total

Ending Income Income Income Return

2010 339,840 239,036 250,362 252,810 2011 178,311 134,366 154,959 154,912 2012 314,636 221,592 229,630 229,868 2013 401,939 291,752 293,493 292,771 2014 424,297 308,974 306,111 288,294 5-Yr Total 1,659,023 1,195,720 1,234,555 1,218,655 ————Company———— ——Industry Composite—— Period Pre-tax Return Operating Pre-tax Return Operating Ending ROR (%) on PHS (%) Ratio (%) ROR (%) on PHS (%) Ratio (%)

2010 18.6 14.6 80.7 11.1 9.4 88.1 2011 9.3 8.4 90.4 6.5 5.5 93.0 2012 15.6 11.8 82.9 7.6 7.7 91.5 2012 17.7 14.0 81.1 15.1 12.3 84.4 2014 17.3 12.8 81.6 13.1 11.2 86.6 5-Yr Avg 15.8 12.4 83.2 10.8 9.3 88.6

Underwriting Results: The group has posted excellent underwriting results over the past five years, with a loss ratio over that time that is far superior to that of the composite. In 2011, however, the group posted its highest loss ratio

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in over a decade as a result of a significant increase in catastrophe losses, and to a lesser extent smaller reserve releases than in previous years. Despite the impact of Superstorm Sandy, underwriting results in 2012, were greatly improved with the help of higher prior accident year reserve releases and lower catastrophe activity overall. Profitability returned to pre-2011 levels in 2013, primarily due to lower than normal catastrophe losses. Strictly defined niches, product innovation and individual account underwriting are the operational hallmarks that have led to the historically favorable results. The group’s consistent underwriting performance has been achieved despite some adverse loss reserve development on prior accident years, most recently on accident years 2010 and 2011. The group’s expense ratio remains on par with the composite, which also helps lead to a five-year combined ratio that is over than 10 percentage points more favorable than the composite average. A.M. Best believes the strong underwriting fundamentals will continue to provide opportunities to generate underwriting profits in the future.

The long-held philosophy of Philadelphia Insurance Companies is for the group to generate an underwriting profit on each line of business written. Individual account underwriting techniques have been established and strong risk management acumen helps bring about the consistency in underwriting results. Another factor influencing the favorable results in recent years is the group’s focused and disciplined market expansion. Additionally, the group’s marketing strategy has successfully utilized product differentiation and the maintenance of close customer contact with agents and insureds to cultivate long-term relationships. UNDERWRITING EXPERIENCE Period Ending Net Undrw Income ($000)

—Loss Ratios— —Expense Ratios— Ind Pure

Loss LAE Loss &LAE Comm.Net OtherExp. TotalExp. Div.Pol. Comb.Ratio Comb.Ratio 2010 177,864 49.5 10.5 60.0 16.0 13.6 29.6 … 89.6 104.4 2011 4,282 58.2 12.0 70.3 15.6 13.6 29.2 … 99.5 107.8 2012 126,993 52.3 10.5 62.8 16.3 13.1 29.4 … 92.1 105.7 2013 206,794 49.4 11.5 61.0 15.9 12.9 28.8 0.0 89.8 98.7 2014 212,017 50.0 11.5 61.5 15.8 12.9 28.7 0.0 90.3 99.1 5-Yr Total/Avg 727,950 51.7 11.2 63.0 15.9 13.2 29.1 … 92.1 103.0

BY-LINE LOSS RATIO

Product Line 2014 2013 2012 2011 2010 5-Yr Avg

Com’l MultiPeril 48.3 46.4 52.2 63.5 53.0 52.2

Comm’l Auto Liab 74.6 59.3 55.8 55.5 52.1 60.2

Oth Liab Occur 48.9 49.7 37.2 39.1 27.6 41.6

Oth Liab CM 33.0 51.7 56.7 57.1 49.7 49.7

Auto Physical 54.3 49.9 61.3 52.0 49.9 53.5

Surety 23.6 25.0 25.0 25.0 … 24.4

All Other 38.5 62.3 69.4 67.7 38.9 54.9

Total 50.0 49.4 52.3 58.2 49.5 51.7

DIRECT LOSS RATIO BY STATE

2014 2013 2012 2011 2010 5-Yr Avg New York 55.0 64.2 79.9 59.7 49.1 61.7 California 45.6 47.7 49.5 64.3 46.6 50.6 Florida 62.0 47.7 58.2 41.9 39.2 51.0 Texas 36.8 52.3 46.0 55.4 37.2 45.5 Pennsylvania 41.3 67.1 47.6 51.6 45.1 50.6 New Jersey 48.7 49.0 76.2 59.2 43.2 54.9 Massachusetts 35.3 49.5 27.7 58.9 36.0 41.3 Illinois 63.2 59.5 63.7 54.2 32.9 55.4 Washington 39.6 32.1 36.9 54.0 47.3 41.5 Connecticut 42.2 44.0 45.4 68.5 71.3 52.9 All Other 50.9 40.3 46.5 57.2 55.4 49.8 Total 49.2 48.5 52.8 57.5 48.9 51.2

Investment Results: Net investment income has grown annually over the past five years, as the group’s growing invested asset base has been strongly influenced by the increases in written premium. Generation of substantial operating cash flow is directly tied to the increased investment income. The increased concentration of invested assets in a portfolio emphasizing tax-exempt state and municipal bonds has resulted in a pre-tax investment yield below the composite average. The growth in invested assets has been consistent despite substantial levels of shareholder dividends paid annually to the parent organization.

INVESTMENT GAINS ($000)

——————————Company——————————

Net Realized Unrealized

Inv Capital Capital

Year Income Gains Gains

2010 161,769 11,326 2,448 2011 173,918 20,593 -47 2012 187,593 8,039 238 2013 195,120 1,740 -722 2014 211,914 -2,863 -17,817 5-Yr Total 930,314 38,835 -15,900

———————Company——————— Industry Composite Pre-tax

Invest

Inv Inc Inv Return on Total Inv Inc Inv Growth Yield Inv Assets Return Growth Yield

Year (%) (%) (%) (%) (%) (%) 2010 17.7 4.0 4.3 4.3 4.3 4.5 2011 7.5 3.9 4.4 4.3 -5.6 4.2 2012 7.9 3.8 4.0 4.0 0.5 4.1 2013 4.0 3.6 3.6 3.6 6.2 4.3 2014 8.6 3.6 3.5 3.2 -10.9 3.7 5-Yr Avg 8.7 3.8 3.9 3.8 -1.2 4.2

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BALANCE SHEET STRENGTH

Capitalization: The group maintains strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Growth in surplus has largely kept pace with the increase in premium and loss reserves in recent years, resulting in fairly consistent net underwriting leverage measures that approximate the composite. Annual generation of retained earnings has been the driver of the group’s considerable surplus appreciation over the last decade. Recent growth in surplus has been constrained by shareholder dividends in four of the last five years as well as increased catastrophe losses. Annual dividends over the latest five years totaled $568 million, including extraordinary dividends of $158 million in both December 2014 and June 2013. Both underwriting and investment activities have contributed materially to the group’s organic earnings production.

Going forward, A.M. Best expects the group to pursue additional top-line growth resulting from expanded marketing efforts, the continued maturation of recently introduced products, along with the addition of new products. Other opportunities may be created by market dislocation where the group can utilize its ample and diverse distribution force to pursue these new business opportunities. A.M. Best expects the group’s capitalization to remain strong and comfortably supportive of the ratings.

Current BCAR: 310.5

CAPITAL GENERATION ANALYSIS ($000) ————————Source of Surplus Growth————————

Pre-tax Realized Unrealized

Operating Capital Income Capital

Year Income Gains Taxes Gains

2010 339,840 11,326 100,804 2,448 2011 178,311 20,593 43,945 -47 2012 314,636 8,039 93,044 238 2013 401,939 1,740 110,187 -722 2014 424,297 -2,863 115,323 -17,817 5-Yr Total 1,659,023 38,835 463,303 -15,900

—————Source of Surplus Growth—————

Net Change % Chg

Contrib. Other in in

Year Capital Changes PHS PHS

2010 -100,000 6,358 159,168 9.7 2011 -100,000 5,791 60,703 3.4 2012 -100,000 20,305 150,174 8.0 2013 -158,000 4,764 139,535 6.9 2014 -110,000 2,368 180,662 8.4 5-Yr Total -568,000 39,587 690,242 7.3 QUALITY OF SURPLUS ($000)

Surplus Other Contributed Unassigned

Year Notes Debt Capital Surplus

2010 … … 427,102 1,379,200

2011 … … 432,531 1,434,474

2012 … … 390,570 1,626,608

2013 … … 390,570 1,766,143

2014 … … 390,570 1,946,805

Year-End Conditional Adjusted

Year PHS Reserves PHS 2010 1,806,302 505 1,806,807 2011 1,867,005 2,773 1,869,778 2012 2,017,179 1,398 2,018,577 2013 2,156,714 1,323 2,158,036 2014 2,337,376 1,000 2,338,376 LEVERAGE ANALYSIS Period Ending

—————Company———— ————Industry Composite———— NPW to

PHS Res.

to

PHS Lev.Net GrossLev. NPW toPHS Res.

to

PHS Lev.Net GrossLev.

2010 1.0 1.1 2.8 3.0 0.7 1.4 2.8 3.6

2011 1.0 1.3 3.0 3.1 0.8 1.5 3.0 3.8

2012 1.1 1.3 3.0 3.2 0.8 1.4 2.9 3.8

2013 1.1 1.3 3.1 3.3 0.8 1.4 3.0 3.7

2014 1.1 1.4 3.2 3.3 0.8 1.4 2.9 3.6

CEDED REINSURANCE ANALYSIS ($000)

Period Ending

——————Company—————— ——Industry Composite—— Ceded Reins. Total Bus. Ret. (%) Reins. Recov. to PHS (%) Ceded Reins. to PHS (%) Bus. Ret. (%) Reins. Recov. to PHS (%) Ceded Reins. to PHS (%) 2010 368,085 89.9 12.2 20.4 81.4 57.1 80.0 2011 339,069 90.6 11.2 18.2 81.8 59.1 84.6 2012 397,860 90.7 12.2 19.7 82.4 58.2 83.6 2013 361,976 92.1 8.5 16.8 82.7 53.9 78.3 2014 384,603 93.0 8.9 16.5 83.4 50.9 75.3 2014 REINSURANCE RECOVERABLES ($000) Paid & Unpaid Losses IBNR Unearned Premiums Other Recov* Total Reins Recov US Affiliates... 95,073 88,465 66,411 … 249,949 Foreign Affiliates... 4,162 12,365 6,390 438 23,355 US Insurers ... 40,879 60,645 37,362 … 138,886 Pools/Associations... 2,377 5,624 22,324 … 30,325 Other Non-US... 5,105 6,954 4,057 -31 16,085 Total (ex US Affils) ... 52,523 85,588 70,133 407 208,651 Grand Total... 147,596 174,053 136,544 407 458,600

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Loss Reserves: The group has experienced favorable loss reserve development in each of the last ten calendar years, which has enhanced reported results. Over this period, accident year reserve development has been mixed as adverse development has been recorded in four of the last ten accident years. Most of the adverse development was experienced in the 2010 accident year, primarily attributable to worse than expected case incurred development mainly for the commercial multi-peril line of business, and to a lesser degree, the general liability occurrence line. The 2013 increase in estimated unpaid loss and loss adjustment expenses for the 2011 accident year was primarily attributable to higher than expected case incurred development mainly for the commercial multi-peril coverage, the commercial automobile liability coverage and the other liability occurrence line. However, this partially reversed with the subsequent evaluation of that year during 2014.The level of overall loss reserves has increased in recent years due to the continued growth in premium.

LOSS & ALAE RESERVE DEVELOP.: CALENDAR YEAR ($000) Calendar Year Orig. Loss Reserves Developed Reserves Thru ’14 Develop. to Orig. (%) Develop. to PHS (%) Develop. to NPE (%) Unpaid Reserves @12/14 Unpaid Res. to Develop. (%) 2009 1,612,810 1,395,455 -13.5 -13.2 81.8 187,609 13.4 2010 1,925,771 1,788,802 -7.1 -7.6 97.9 354,245 19.8 2011 2,249,541 2,146,831 -4.6 -5.5 112.2 656,643 30.6 2012 2,518,067 2,455,012 -2.5 -3.1 121.7 1,150,761 46.9 2013 2,743,679 2,719,311 -0.9 -1.1 120.1 1,920,026 70.6 2014 3,006,121 3,006,121 … … 122.3 3,006,121 100.0 LOSS & ALAE RESERVE DEVELOP.: ACCIDENT YEAR ($000) Accident Year Orig. Loss Reserves Developed Reserves Thru ’14 Develop. to Orig. (%) Unpaid Reserves @12/14 Acc. Yr Loss Ratio Acc. Yr Comb. Ratio 2009 672,635 629,315 -6.4 90,399 55.6 84.5 2010 777,001 822,700 5.9 166,636 64.8 94.4 2011 903,721 903,879 0.0 302,398 71.3 100.5 2012 948,632 941,310 -0.8 494,118 65.1 94.5 2013 1,011,720 1,028,803 1.7 769,265 62.9 91.7 2014 1,086,095 1,086,095 … 1,086,095 63.6 92.4

Liquidity: Solid current and overall liquidity has been maintained at levels that exceed the industry composite averages. The group’s liquidity reflects increased premium collections and considerable operating cash flow generated annually. The membership of the group’s two operating companies with the Federal Home Loan Bank of Pittsburgh (FHLB) provides an additional source of liquidity, if needed. The companies are able to utilize established borrowing capacity, based on their FHLB-eligible level of collateral. As of December 31, 2014, the unused borrowing capacity was $523.1 million, which provides an immediately available line of credit. As of the same date, there were no borrowings outstanding with the FHLB.

LIQUIDITY ANALYSIS

Period Ending

—————Company————— ————Industry Composite———— Quick

Liq. (%) Liq. (%)Current Liq. (%)Overall Gross Agents Bal.

to PHS (%) Liq. (%)Quick Liq. (%)Current Liq. (%)Overall Gross Agents Bal. to PHS (%) 2010 15.1 135.3 156.5 4.5 21.2 104.0 147.0 8.8 2011 12.5 133.4 152.0 3.5 20.1 102.2 145.2 10.1 2012 12.1 131.4 150.1 2.6 22.0 100.8 145.6 10.8 2013 6.9 129.8 149.4 4.8 22.8 102.4 145.7 10.6 2014 9.7 126.7 148.3 4.8 24.0 103.4 147.5 10.2

CASH FLOW ANALYSIS ($000)

—————————Company————————— Industry Composite Underw Oper Net Underw Oper Underw Oper

Cash Cash Cash Cash Cash Cash Cash

Year Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%) 2010 525,363 566,356 17,215 139.4 138.5 96.4 108.7 2011 393,117 573,854 -28,372 125.6 136.9 96.2 107.3 2012 521,510 602,470 99,621 133.1 135.2 99.4 112.9 2013 465,365 601,733 -79,552 126.0 131.9 107.2 118.7 2014 560,335 717,716 42,613 128.8 135.2 103.0 113.4 5-Yr Total 2,465,690 3,062,129 51,524 … … … …

Investments: Invested assets represent over 88% of total admitted assets. Non-invested assets are primarily comprised of uncollected agent’s premium balances generated by the increase in premiums. During 2009, the group liquidated its common stock portfolio with the only equities remaining being those that are in concert with its FHLB investment. With the liquidation of the equity portfolio, long-term fixed income holdings comprise more than 98% of invested assets, underscoring the traditionally conservative investment strategy of the group. As of year-end 2014, equity investment leverage remained below 4%.

INVESTMENT LEVERAGE ANALYSIS (% OF PHS)

Period Ending

—————————Company————————— —Composite—Industry Class 3-6 Bonds Real Estate/ Mtg. Other Invested

Assets CommonStocks

Non-Affil. Inv. Lev. Affil.Inv.

Class 3-6 Bonds CommonStocks

2010 0.0 … … 0.6 0.6 … 6.9 9.3

2011 0.6 … … 0.5 1.0 … 7.0 9.8

2012 … … … 0.3 0.3 … … 10.5

2013 0.2 … 1.2 0.2 1.6 … 7.4 14.7

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INVESTMENTS - SECURITIES Current Year Distribution of Bonds By Maturity

————————Years———————— Yrs-Avg

0-1 1-5 5-10 10-20 20+ Maturity

Government 0.9 1.4 1.4 0.7 0.0 6

Gov’t Agencies & Muni 3.4 22.3 24.0 7.8 6.5 8

Industrial & Misc 1.4 13.5 13.6 0.7 1.5 6

Hybrid Securities … 0.1 0.3 … 0.4 16 Total 5.8 37.3 39.3 9.2 8.4 8 2014 2013 2012 2011 2010 Bonds (000) 5,869,602 5,603,006 5,148,801 4,750,407 4,256,061 US Government 3.2 1.5 3.0 3.7 7.8 Foreign Government 0.6 0.9 1.0 1.1 1.2

Foreign - All Other 4.8 2.3 2.7 2.0 2.5

State/Special Revenue - US 64.5 76.6 78.4 80.7 76.6 Industrial & Misc - US 26.9 18.6 14.9 12.5 11.9

Private Issues 13.5 6.4 3.0 2.1 1.6 Public Issues 86.5 93.6 97.0 97.9 98.4 Bond Quality (%) 2014 2013 2012 2011 2010 Class 1 91.6 96.2 96.6 97.1 97.0 Class 2 5.6 3.7 3.4 2.6 3.0 Class 3 1.1 0.1 … … … Class 4 1.1 … … … … Class 5 0.5 … … 0.2 … Class 6 0.1 … … … 0.0 INVESTMENTS - EQUITIES 2014 2013 2012 2011 2010 Stocks (000) 157,029 3,594 6,229 8,782 10,782 Unaffiliated Common 62.2 100.0 100.0 100.0 100.0 Unaffiliated Preferred 37.8 … … … …

INVESTMENTS - MORTGAGE LOANS & REAL ESTATE

2014 2013 2012 2011 2010

Mortgage Loans &

Real Estate (000) 21,402 … … … …

Mortgage Loans 100.0 … … … …

INVESTMENTS - OTHER INVESTED ASSETS

2014 2013 2012 2011 2010

Other Inv Assets (000) 199,603 29,119 82,120 -17,257 11,079

Cash 2.0 -99.9 18.3 481.3 -99.9

Short-Term 20.5 141.7 81.6 -99.9 258.1

Schedule BA Assets 77.4 91.6 … … …

All Other … … 0.2 -2.2 3.0

HISTORY

The company was incorporated under the laws of the Commonwealth of Pennsylvania as the Philadelphia Mutual Insurance Company on February 4, 1927, and began business on March 1 of the same year. The name, Philadelphia Insurance Company, went into effect after the company converted from a mutual company to a stock company on December 3, 1987. The present title was adopted on June 20, 1990, concurrent with the merger of a former companion carrier, The Preserver Assurance Company.

Common capital stock of $3,599,950 consists of 359,995 shares of common stock at a par value of $10 per share. A total of 1,000,000 shares are authorized.

MANAGEMENT

The company is wholly owned by Philadelphia Consolidated Holding Corp. (Philadelphia Consolidated), which is also the parent of Tokio Marine Specialty Insurance Company, Liberty American Insurance Company and Liberty American Select Insurance Company. The company maintains joint administrative offices with Tokio Marine Specialty Insurance Company. Effective December 1, 2008, Philadelphia Consolidated was acquired by Tokio Marine Holdings, Inc. (TMHD) through TMHD’s wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF). TMNF was founded in 1879, and is the oldest and largest property and casualty insurer in Japan. On March 31, 2012, TMNF contributed 100% of the outstanding shares of Philadelphia Consolidated to Tokio Marine North America, Inc. (TMNA), an insurance holding company domiciled in the State of Delaware and a wholly owned direct subsidiary of TMNF.

Management of the company is under the direction of Robert D. O’Leary, Jr., President and Chief Executive Officer. He serves in a similar capacity with the affiliate, Tokio Marine Specialty Insurance Company.

The company has an agreement with Maguire Insurance Agency, Inc., which is also wholly owned by Philadelphia Consolidated, to provide underwriting, policy service, claims handling and sales support. The company also has an agreement with TMNA Services, LLC, which is wholly owned by TMNA, to provide accounting, actuarial, legal, facility maintenance, information technology, human capital and internal audit services. The compensation structure is based on fees consistent with industry standards. Officers: Chairman of the Board, James J. Maguire, Jr.; President and Chief Executive Officer, Robert D. O’Leary; Executive Vice President, Treasurer and Chief Financial Officer, Karen A. Gilmer-Pauciello; Executive Vice President and Chief Underwriting Officer, John W. Glomb; Executive Vice

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President and Chief Claim Officer, William J. Benecke; Executive Vice President and Chief Marketing Officer, Brian J. O’Reilly.

Directors: Karen A. Gilmer-Pauciello, Hiroyuki Haruyama, James J. Maguire, Jr. (Chairman), Bruce Meyer, Michael J. Morris, Robert D. O’Leary, Donald A. Pizer.

REGULATORY

An examination of the financial condition was made as of December 31, 2010, by the insurance department of Pennsylvania. The 2014 annual independent audit of the company was conducted by PricewaterhouseCoopers, LLP. The annual statement of actuarial opinion is provided by Mark R. Proska, FCAS, MAAA, Executive Vice President and Chief Actuarial Officer, TMNA Services, LLC.

REINSURANCE

Under its casualty treaty, the group retains the first $3.0 million primary layer of liability on each occurrence and maintains reinsurance coverage up to $21.0 million provided in two layers — $13.0 million in excess of $3.0 million and $5.0 million in excess of $16.0 million. This coverage is placed with a 20% co-participation being retained. Facultative reinsurance coverage (on an individual risk basis) is purchased for casualty risks in excess of $21.0 million. An excess clash casualty reinsurance agreement provides an additional $15.0 million of coverage in excess of a $5.0 million retention for protection from exposures such as extra-contractual obligations and judgments in excess of policy limits.

The group retains the first $5.0 million layer on its property risks plus an additional $5.0 million annual aggregate deductible, with its reinsurers bearing liability up to $95.0 million excess of the retention. The first property layer ($5.0 million in excess of $5.0 million and in excess of the $5.0 million annual aggregate deductible) is placed with a 50% co-participation being retained, whereas the remaining $90.0 million of coverage is 100% placed. Automatic facultative reinsurance coverage is provided on each commercial property risk with limits in excess of $100.0 million up to $150.0 million, except for risks located in Florida, Hawaii or Harris County, Texas, where coverage is provided for property losses in excess of $100.0 million up to $130.0 million. The property per risk excess of loss treaties also provide a $95.0 million aggregate policy limit for terrorism exposure in excess of a $5.0 million retention. The automatic facultative facility provides terrorism coverage for $50 million in the aggregate.

Catastrophe reinsurance is maintained in excess of a $100.0 million per occurrence retention up to $500.0 million. On the first excess layer of the catastrophe contract ($150.0 million in excess of $100.0 million applicable to losses occurring nationwide), the group retains a 5% co-participation. This layer is shared with an affiliate, First Insurance Company of Hawaii, whose risk exposure is in Hawaii only. The second excess layer of the catastrophe contract ($200.0 million in excess of $250.0 million applicable also to losses occurring nationwide), is 100% placed and is also shared with First Insurance

Company of Hawaii. The top layer of the catastrophe program ($50.0 million in excess of $450 million applicable to losses occurring in the Northeast only), is also 100% placed. This layer is not shared with any affiliates.

BALANCE SHEET ADMITTED ASSETS ($000) 12/31/14 12/31/13 ’14% ’13% Bonds ... 5,869,602 5,603,006 81.7 85.9 Preferred stock ... 59,414 … 0.8 … Common stock... 97,616 3,594 1.4 0.1 Cash & short-term invest ... 45,054 2,440 0.6 0.0 Other non-affil inv asset ... 163,416 26,678 2.3 0.4 Investments in affiliates ... 12,535 … 0.2 … Total invested assets... 6,247,636 5,635,719 87.0 86.4 Premium balances ... 673,590 626,337 9.4 9.6 Accrued interest ... 65,074 61,467 0.9 0.9 All other assets... 195,916 202,538 2.7 3.1 Total assets... 7,182,217 6,526,061 100.0 100.0

LIABILITIES & SURPLUS ($000)

12/31/14 12/31/13 ’14% ’13% Loss & LAE reserves ... 3,169,910 2,895,803 44.1 44.4 Unearned premiums... 1,260,065 1,164,576 17.5 17.8 Conditional reserve funds ... 1,000 1,323 0.0 0.0 All other liabilities ... 413,866 307,645 5.8 4.7 Total liabilities ... 4,844,841 4,369,348 67.5 67.0 Capital & assigned surplus... 390,570 390,570 5.4 6.0 Unassigned surplus... 1,946,805 1,766,143 27.1 27.1 Total policyholders’ surplus... 2,337,376 2,156,714 32.5 33.0 Total liabilities & surplus... 7,182,217 6,526,061 100.0 100.0