-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I7WucW96abDw0sdPGaUp4lpffgUXWRAg8SCfMRjT2fOhrYbWgjMfL8rAMTKALe74 NPwyBZ9xLr64zaUbMSC2MA== 0000950159-03-000891.txt : 20031105 0000950159-03-000891.hdr.sgml : 20031105 20031104182357 ACCESSION NUMBER: 0000950159-03-000891 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031104 ITEM INFORMATION: ITEM INFORMATION: Other events FILED AS OF DATE: 20031105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PMA CAPITAL CORP CENTRAL INDEX KEY: 0001041665 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 232217932 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31706 FILM NUMBER: 03977459 BUSINESS ADDRESS: STREET 1: 1735 MARKET STREET SUITE 2800 CITY: PHILADELPHIA STATE: PA ZIP: 19103-7590 BUSINESS PHONE: 2156655046 MAIL ADDRESS: STREET 1: 1735 MARKET STREET SUITE 2800 CITY: PHILADELPHIA STATE: PA ZIP: 19103-7590 FORMER COMPANY: FORMER CONFORMED NAME: PENNSYLVANIA MANUFACTURERS CORP DATE OF NAME CHANGE: 19970702 8-K 1 pma8k11-4.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 4, 2003 ---------------- PMA Capital Corporation ----------------------- (Exact name of registrant as specified in its charter) Pennsylvania 000-22761 23-2217932 ------------ --------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1735 Market Street, Suite 2800 Philadelphia, Pennsylvania 19103-7590 -------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 665-5046 -------------- Not Applicable -------------- (Former name or former address, if changed since last report) Item 5. Other Events and Regulation FD Disclosure. ------------------------------------------ The following is an update to the risk factors included in our Form 10-K for the year ended December 31, 2002. This Form 8-K should, therefore, be read in conjunction with the risk factors included in that periodic report. Because insurance and credit ratings are important to our policyholders and creditors, downgrades in our ratings may adversely affect us. Due to our announcement (attached hereto as Exhibit 99.1) that we will record a pre-tax charge of approximately $150 million at September 30, 2003 primarily to strengthen loss reserves at our reinsurance operations, on November 4, 2003, we were informed that the principal nationally recognized ratings agencies that rate the financial strength of our principal insurance subsidiaries and the debt of PMA Capital Corporation have taken the following actions on our ratings: o A.M. Best announced that it has lowered the insurer financial strength rating of PMA Capital Insurance Company, our reinsurance subsidiary, from A- (4th of 16) to B++ (5th of 16), and has lowered the insurer financial strength rating of The PMA Insurance Group (Pennsylvania Manufacturers' Association Insurance Company, Pennsylvania Manufacturers Indemnity Company and Manufacturers Alliance Insurance Company), or the Pooled Companies, our primary insurance subsidiaries, from A- (4th of 16) to B++ (5th of 16). All of these ratings are under review with negative implications. o Standard & Poor's announced that it has lowered the insurer financial strength of PMA Capital Insurance Company from A- (7th of 21) to BBB- (10th of 21), and has lowered the insurer financial strength of the Pooled Companies from A- (7th of 21) to BBB (9th of 21). Standard & Poor's also lowered the senior debt ratings on PMA Capital Corporation from BBB- (10th of 22) to BB- (13th of 22). All of these ratings are on credit watch with negative implications. o Moody's Investors Service announced that it has lowered the insurer financial strength of PMA Capital Insurance Company from Baa1 (8th of 21) to Ba1 (11th of 21), and has lowered the insurer financial strength of the Pooled Companies from Baa1 (8th of 21) to Baa2 (9th of 21). Moody's also lowered the senior debt ratings on PMA Capital Corporation from Ba1 (11th of 21) to Ba3 (13th of 21). All of these ratings are on review for further possible downgrade. As we have stated previously, a downgrade in our insurer financial strength ratings could result in a material loss of business as policyholders move to other companies with higher financial strength ratings. We believe that the aforementioned downgrades, especially the A.M. Best downgrades, will materially impair the ability of our reinsurance operations to write business and will significantly impair the ability of our primary insurance operations to write business. Any further downgrades to our insurer financial strength ratings would have a material adverse effect on our results of operations, liquidity and capital resources. The downgrade in our debt ratings will affect our ability to raise additional debt with terms and conditions similar to our current debt, and, accordingly, will increase our cost of capital. In addition, this downgrade of our debt ratings will make it more difficult to raise capital to refinance any 2 maturing debt obligations and to maintain or improve the current financial strength ratings of our principal insurance subsidiaries. If Standard & Poor's lowers the debt rating assigned to our 4.25% Senior Convertible Debentures due 2022, or the Debentures, below BB- and Moody's lowers the debt rating assigned to the Debentures below Ba3, or the ratings assigned to the Debentures are suspended or withdrawn, or only one rating agency is rating the Debentures and the rating is below the levels specified in this sentence, then each $1,000 principal amount of the Debentures, of which $87.25 million is outstanding, will become convertible into 61.0948 shares of our Class A common stock at a conversion price of $16.368 per share, subject to adjustment upon certain events as described in the indenture filed as an exhibit to our Form 8-K dated October 16, 2002. These ratings are subject to revision or withdrawal at any time by the rating agencies, and therefore, no assurance can be given that we or our principal insurance subsidiaries can maintain these ratings. Each rating should be evaluated independently of any other rating. Item 12. Disclosure of Results of Operations and Financial Condition ----------------------------------------------------------- On November 4, 2003, the registrant issued a news release, a copy of which is filed as Exhibit 99.1 hereto and is incorporated herein by reference. The information, including exhibits attached hereto, furnished under this Item 12 shall be deemed "filed" for the purposes of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The information in this Current Report shall be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PMA Capital Corporation Date: November 4, 2003 By: /s/ William E. Hitselberger ------------------------------ William E. Hitselberger Senior Vice President, Chief Financial Officer and Treasurer 4 Index to Exhibits Number Description Method of Filing ------ ----------- ---------------- 99.1 PMA Capital Corporation Filed herewith. news release dated November 4, 2003 E-1 EX-99 3 ex99-1.txt EXHIBIT 99.1 EXHIBIT 99.1 PMA CAPITAL [LOGO] Mellon Bank Center Suite 2800 1735 Market Street Philadelphia, PA 19103-7590 PRESS RELEASE - -------------------------------------------------------------------------------- For Release: Immediate Contact: William Hitselberger (215) 665-5070 PMA Capital Announces Reserve Charge and Suspension of Common Stock Dividend Philadelphia, PA, November 4, 2003- Following a comprehensive review of its loss reserves, PMA Capital (NASDAQ: PMACA) announced today that it will record a pre-tax charge of approximately $150 million primarily to strengthen PMA Re's loss reserves at September 30, 2003. As a result of this charge, the Company has decided to suspend its common stock dividends at the current time. The Company is exploring strategic alternatives and has announced that it has engaged Banc of America Securities LLC to assist it in this activity. During the third quarter, the Company's internal actuaries conducted their periodic comprehensive reserve review, which included an extensive review of carried reserves for accident years 1997-2000. The Company also had an independent actuarial firm conduct an evaluation of PMA Re's traditional property and casualty loss reserves, which supported the Company's conclusion. PMA Re's reserve charge relates to higher than expected underwriting losses in the reinsurance operations, primarily from casualty business written in accident years 1997 through 2000. The Company also completed its review of the loss reserves at The PMA Insurance Group, and determined that no reserve adjustments were necessary. The statutory capital of The PMA Insurance Group will not be affected by the charge. As a result of this charge, the Company will evaluate the recoverability of its deferred tax asset at September 30, 2003. The Company will also be evaluating the effect of this action, including any ratings actions, on its ongoing businesses, liquidity and capital resources. The Company is currently engaged in discussions with the Pennsylvania Insurance Department regarding the operations of its insurance subsidiaries. As it has previously announced, the Company will release its earnings for the third quarter of 2003 on Thursday, November 6, 2003, after the market closes. At that time, a copy of the Company's earnings release and quarterly statistical supplement will be available on the Company's website at www.pmacapital.com in the Investor Information section (choose Current Investor Information) and then click on News Releases to access the release; from Current Investor Information, you can click on Financial Reports to access the quarterly statistical supplement. The Company will hold a conference call with investors beginning at 8:30 a.m. Eastern Time on Friday, November 7th to review the third quarter 2003 results. The conference call will be available via a live webcast over the Internet at www.pmacapital.com. To access the webcast, enter the Investor Information section (choose Current Investor Information), click on News Releases to find this announcement and then click on the microphone next to this release. Please note that by accessing the conference call via the Internet, you will be in a listen-only mode. The call-in numbers for the conference call are as follows: Live Call Replay --------- ------ 800-201-1151 (Domestic) 800-615-3210 (Domestic) 952-556-1576 (International) 703-326-3020 (International) A replay of the conference call will be available over the Internet or by dialing the call-in number for the replay and using the passcode 286830. The replay will be available from approximately 11:30 a.m. Eastern Time on Friday, November 7th until 11:59 p.m. Eastern Time on Friday, November 14th. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements contained in this press release, including those made by individuals authorized to speak on behalf of PMA Capital Corporation ("we", "our" or the "Company") that are not historical facts are forward-looking statements and are based on estimates, assumptions and projections. Actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements are based on currently available financial, competitive and economic data and the Company's current operating plans based on assumptions regarding future events. The Company's actual results could differ materially from those expected by the Company's management. The factors that could cause actual results to vary materially, some of which are described with the forward-looking statements, include, but are not limited to: o the actual amount of the reserve charge related to PMA Re's loss reserves; o the amount by which the Company must write down its current deferred tax asset; o a downgrade in the current financial strength ratings of the Company's insurance subsidiaries by A.M. Best would result in a material loss of business as policyholders move to other companies with higher financial strength ratings; o the ability of the Company to continue to receive dividends from its insurance subsidiaries in an amount sufficient to meet its debt service obligations; o the lowering or loss of one or more of the Company's debt ratings, and the adverse impact that any such downgrade may have on our ability to raise capital and our liquidity and financial condition; o adequacy of reserves for claim liabilities; o adverse property and casualty loss development for events that we insured in prior years; o adequacy and collectibility of reinsurance that we purchased; o regulatory or tax changes, including changes in risk-based capital or other regulatory standards that affect the cost of, or demand for, our products or otherwise affect our ability to conduct business, including the outcome of discussions with the Pennsylvania Insurance Department; 2 o competitive conditions that may affect the level of rate adequacy related to the amount of risk undertaken and that may influence the sustainability of adequate rate changes; o ability to implement and maintain rate increases; o the effect of changes in workers' compensation statutes and their administration, which may affect the rates that we can charge and the manner in which we administer claims; o our ability to predict and effectively manage claims related to insurance and reinsurance policies; o the uncertain nature of damage theories and loss amounts and the development of additional facts related to the attack on the World Trade Center; o uncertainty as to the price and availability of reinsurance on business we intend to write in the future, including reinsurance for terrorist acts; o severity of natural disasters and other catastrophes, including the impact of future acts of terrorism, in connection with insurance and reinsurance policies; o changes in general economic conditions, including the performance of financial markets, interest rates and the level of unemployment; o uncertainties related to possible terrorist activities or international hostilities; and o other factors disclosed from time to time in our most recent Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission. Investors should not place undue reliance on any forward-looking statements. Unless otherwise stated, the Company disclaims any current intention to update forward-looking information and to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 3 -----END PRIVACY-ENHANCED MESSAGE-----