Jamie Maguire's Presentation

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Best Practices for Short and Long Term Success

Jamie Maguire Chairman and CEO

Philadelphia Insurance Companies

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Agenda

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1. Overview of PHLY

2. Growth Strategies

3. PHLY’s Best Practices / Governance

4. 2013 Commentary

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Agenda

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1. Overview of PHLY

2. Growth Strategies

3. PHLY’s Best Practices / Governance

4. 2013 Commentary

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Tokio Marine North America

Gillingham &

Associates, Inc.

Valley Forge Insurance Brokerage

(Admitted Carrier) (E&S Carrier) (Management Company)

Philadelphia Indemnity Insurance Company

Maguire Insurance

Agency, Inc.

Tokio Marine Specialty Insurance Company

Philadelphia Consolidated Holding Corp.

Organizational Structure

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Overview of PHLY Founded in 1962 Niche market Commercial P&C insurer 85.7% Renewal Retention 49.3% New Business Hit Ratio 93.2% Combined Ratio* $7.7 Billion Total Assets Debt-Free Balance Sheet 1,624 Employees Nationwide 45 Offices across the U.S.

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* Excludes impact of purchase accounting items

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Regional Offices

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A Track Record of Growth

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CAGR 2007-2011 = 6.5%

($’s($ in millions) Gross Written Premiums

$1,692.2$1,891.7

$2,032.6 $2,135.5 $2,172.9

$0

$500

$1,000

$1,500

$2,000

$2,500

2007 2008 2009 2010 2011

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Superior Underwriting Results

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91.0%

109.6%

92.8%

108.8%

95.8%

115.7%

91.0%

106.9%

89.4%

108.4%

86.7%

106.4%

86.7%

105.8%

84.4%

101.6%

85.1%

105.6%

93.3%

108.1%

90.2%

110.4%

91.9%

115.9%

91.5%

107.3%

90.3%

100.2%

88.7%

98.9%

78.1%

101.2%

68.4%

92.4%

74.3%

95.6%

88.0%

105.1%

85.0%

101.1%

89.5%

102.5%99.7%

108.3%

50%

60%

70%

80%

90%

100%

110%

120%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

PHLY Industry

Statutory Combined Ratios (1)

____________________ Sources: A.M.Best (1989-2009); SNL (2010-2011) (1) Statutory combined ratio calculated after policyholder dividends.

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PHLY Highlights

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A.M. Best Rating - A+ (Superior) 1997–2010,

A++ (Superior) 2011–Present S&P Rating - A+ for Counterpart Credit and

Financial Strength Wards 50 Top Property Casualty Insurer (12

consecutive years) National Underwriter’s Top Insurance Groups

Awards

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PHLY Highlights

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Forbes 400 Best Small, Medium & Large

Company Awards 12 Top workplace awards since 2006

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Tokio Marine Group

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Founded in 1879 Oldest /leading P&C insurer in Japan 30,800 employees - 49 countries Ranked in Top 20 life/non-life insurance

company groups in the world based on market capitalization

Total Assets* $197.2BB A.M. Best Rating** A++ S&P Rating** AA- * For the year ended March 31, 2012. Exchange rate is $1=JPY 82.86 as of March 31, 2012. ** As of November 28, 2012

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Agenda

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1. Overview of PHLY

2. Growth Strategies

3. PHLY’s Best Practices / Governance

4. 2013 Commentary

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Investment Strategy An Integrated Enterprise Capital Management

approach is utilized considering enterprise objectives such as return/risk metrics and performance bench marks.

In keeping Tokio Marine’s Global Investment Strategies, shift the investment portfolio allocation to 100% bonds.

Municipal bonds comprise 65 percent of portfolio.

Bonds have been less volatile portfolio and have performed well in the last few years.

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Organic Growth Strategy Establish Clearly Defined Target Markets

• Acceptable/Unacceptable classes and exposures

Channels of Distribution: open brokerage, agents, direct, internet-policyholder, directs process

Products: value added, niche focused, “10 Reasons Why”

Promotion: telemarketing, print media, trade shows, selling style, SEM, Public Relations

Proactive Risk Selection

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New Product Committee • Formal Process/Bottom up • Coverage “quirk”– E&O, Professional

Liability, GL, Property • Clogged Distribution Channel –

MGA/Wholesalers • Reinsurance: Actuarial, Best Hazard,

ISO, Competitive Filings • React quickly to market conditions

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Organic Growth Strategy

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Tactical Growth Strategy

Acquisitions • Liberty American (1999) • Grundy Worldwide partnership (2006) • Fitness and Wellness Insurance Agency

(2007) • Gillingham & Associates, Inc. (2008)

Launched Surety & Bond Unit (2011) Launched E&S Company (2012)

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Agenda

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1. Overview of PHLY

2. Growth Strategies

3. PHLY’s Best Practices / Governance

4. 2013 Commentary

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Strategic Planning

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Underwriting Culture Underwriting Philosophy

• Niche Underwriting Company • Disciplined – Defined Guidelines,

Procedures, Authority and Continuous Audit

• Make a profit on each line of business written

• Paperless & Single Platform • Individual Account Underwriting

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Home Office Underwriting • Structure and Process and Training • Performance Management • Product Development • Key Statistics - MBO • Audit and Process Improvement

Field Underwriting • New Business • Agency Relationship Management

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Performance Management Tools

Product Performance Template

Scorecard Review

Product Management Site

Underwriting Strategy Committee

Scorecard Review

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Renewal Retention (Quoted) YTD 2Q12 2011

• Commercial Lines 82% 81% • Specialty Lines 88% 88% • Overall 86% 84%

Weighted Average Rate Changes – Renewal Business YTD 2Q12 2011

• Commercial Lines +5.9% +3.1% • Specialty Lines +7.5% +5.4% • Overall +6.2% +3.5%

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New Product Development

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Value Added Coverage and Services

PHLY Bell Endorsement

Abuse/Molestation, Med Mal, Surety, Umbrella

Loss Control – Loss Control 360

Agent Web Portal • Policy/Endorsement retrieval

• Commission Payment

• Online quotations

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ERM Structure

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PHLY/TMNA Board

Tokio Marine HD Executive Committee

Departmental Functions

Other Corporate Governance ERM Subcommittees

ERM Committee

• Compliance • Business Continuity • Risk Appetite • Risk Tolerance/Limits

• Underwriting Strategy • New Product • Reinsurance • Reserve

• Actuarial • Internal Audit • Human Resources • Information Technology

Business units remain the Risk Owners!

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ERM Dashboards

Quarterly report to Management and the Board One to two dashboards per key risk as identified

by the ERM Committee: • Capital, Underwriting, Investment, Credit,

Liquidity, Operational (Audit items, key employees, BC/DR, IT), Group

Enterprise-affecting risks (e.g. CAT risk, Investment Risk, larger operational risks) are more manageable at the strategic/executive level

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ERM and Strategy

ERM does not end with risk identification and calculation

ERM’s should move the company toward a higher risk/return relationship

• Strategies around risk drivers formed to lower risk e.g. relieving some coastal or fault line concentrations

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ERM and Strategy

Strategies around high return segments formed to improve the overall risk/return relationship e.g. grow the high return segments or up-price or shrink the lower return segments Strategies for utilizing “buffer capital” (i.e.

the amount of capital in excess of the calculated overall risk of the company) e.g. acquisition or tactical expansions

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Catastrophe Management Comprehensive underwriting guidelines, with

specific approaches for assessing and pricing risk by peril • Hurricane, Earthquake, Flood, Convective

storm Data Capture

• Focus on data quality and primary / secondary characteristics for accurate model analysis

RMS / AIR modeling on quarterly basis • Multi model view • Cat capacity management at the group level

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Catastrophe Management

TIV accumulation management on monthly basis

Realistic Disaster Scenario testing

Pre & Post loss Impact analysis using RMS / AIR,

GIS Tools (Spatial Key, iaXs etc.)

Cat management tied to Reinsurance Strategy

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Catastrophe book management

Identify key PML drivers Ensure adequate pricing considering the costs

associated with the risk (AAL, Reinsurance, Capital cost etc.) at the policy level

Taking drastic measures when necessary • Significant rate increases • Increased deductibles • Managing sub-limits • Non-Renewal

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Share Best Practices

CEO Conference

CRO Round table

CIO Conference

Global HR Meeting

“Desilotization” Initiative 32

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Agenda

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1. Overview of PHLY

2. Growth Strategies

3. PHLY’s Best Practices / Governance

4. 2013 Commentary

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2013 Commentary

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Changing Weather Paradigm => Capital

Adequacy including ‘buffer capital’

Consolidation is inevitable

Rates rising short term, but Underwriting

discipline is essential long term strategy

‘Winners’ benefit from exceptional interpretive

& diagnostic tools

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2013 Commentary

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Workers Comp will continue to impale

Investment returns => anemic foreseeable

future. Beware of those reaching for yield

Efficient expense platforms => earnings drivers

Higher net retentions => greater EPS volatility

Economic recovery directs Insurance industry

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Thank you

Best wishes for a prosperous 2013!