-----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, A6o8QgNR7nyK27RVZMPEPa+iW9RLnovAFoSaCH/rEEC8S8yv88ORcYL0ZCDcGODl l1vB7gnw4UH7BTwmi+T7SQ== 0000950159-03-000895.txt : 20031106 0000950159-03-000895.hdr.sgml : 20031106 20031106172306 ACCESSION NUMBER: 0000950159-03-000895 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031106 ITEM INFORMATION: FILED AS OF DATE: 20031106 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: 03983114 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 pma8k11-6.htm PMA FORM 8-K

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 6, 2003

PMA Capital Corporation
(Exact name of registrant as specified in its charter)

Pennsylvania
(State or other jurisdiction
of incorporation)		 000-22761
(Commission
File Number)		 23-2217932
(IRS Employer
Identification No.)


  1735 Market Street, Suite 2800
Philadelphia, Pennsylvania
(Address of principal executive offices)		  
19103-7590
(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 12. Disclosure of Results of Operations and Financial Condition

        On November 6, 2003, the registrant issued a news release, a copy of which is filed as Exhibit 99.1 hereto and is incorporated herein by reference, and the Company's Third Quarter 2003 Statistical Supplement is furnished as Exhibit 99.2 and incorporated herein by reference.

        The information, including exhibits attached hereto, furnished under this Item 12 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as otherwise expressly stated in such filing.

2

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 6, 2003 By: /s/ William E. Hitselberger
        William E. Hitselberger
        Senior Vice President, Chief Financial
      Officer and Treasurer

3

Index to Exhibits

Number Description Method of Filing
     
99.1 PMA Capital Corporation
news release dated
November 6, 2003

Filed herewith.

     
99.2 Third Quarter 2003 Statistical Supplement

Filed herewith.

     

E-1

EX-99 3 exhibit99-1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1

PMA CAPITAL [LOGO]
A Specialty Risk Management Company

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 Third Quarter 2003 Results and Management Changes

Philadelphia, PA, November 6, 2003 — PMA Capital (NASDAQ: PMACA) today announced a net loss of $96.4 million, or $3.08 per diluted share, for the third quarter of 2003, compared with net income of $9.4 million, or 30 cents per diluted share, for the third quarter of 2002. For the nine months ended September 30, 2003, we recorded a net loss of $73.5 million, or $2.35 per diluted share, compared to a net loss of $37.6 million, or $1.20 per diluted share for the same period last year.

The net loss for the third quarter includes an after-tax charge of $97.5 million, or $3.11 per share, to increase PMA Re’s loss reserves at September 30, 2003. During the third quarter, our internal actuaries conducted their periodic comprehensive reserve review, which included an extensive review of carried reserves for accident years 1997-2000. An independent actuarial firm also conducted a comprehensive review of PMA Re’s traditional property and casualty loss reserves and concluded that such carried loss reserves are reasonable at September 30, 2003. These studies indicated that PMA Re’s higher than expected underwriting losses in the reinsurance operations, primarily from casualty business written in accident years 1997 through 2000, necessitated the reserve charge. We believe that this reserve charge recognizes our exposure to future adverse loss development at PMA Re. As a result of this charge and PMA Re’s ratings downgrade, we have decided to withdraw from the reinsurance business.

In the third quarter, our internal actuaries’ review of the loss reserves at The PMA Insurance Group indicated that no reserve adjustments were necessary. Accordingly, the statutory capital of The PMA Insurance Group was not affected by the charge. The PMA Insurance Group remains committed to providing excellent service in the markets in which it operates.

We have also evaluated the recoverability of our deferred tax asset at September 30, 2003. Based on this analysis, we established a valuation allowance on the deferred tax asset of $24 million, which impacted results by 77 cents per share. As announced earlier this week, we have decided to suspend payment of common stock dividends at the current time.

1

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 downgraded our ratings to the following:

Financial Strength Ratings: A. M. Best S&P Moody's
PMA Capital Insurance Company B++  (5th of 16) BBB-  (10th of 21) Ba1  (11th of 21)
The PMA Insurance Group B++  (5th of 16) BBB     (9th of 21) Baa2  (9th of 21)

Senior Debt Ratings: S&P Moody's
  BB-  (13th of 22) Ba3  (13th of 21)  

Management Changes

On November 6, 2003, John W. Smithson resigned as our President and Chief Executive Officer. In addition, Frederick W. Anton has decided to step down as Chairman of our Board of Directors. Our Board of Directors has appointed Neal C. Schneider, our Lead Director, as non-executive Chairman of the Board of Directors and has created an interim-Office of the President, to be headed by Vincent T. Donnelly, the current President of The PMA Insurance Group.

Financial Condition

Total assets were $4.4 billion as of September 30, 2003, compared to $4.1 billion as of December 31, 2002. Shareholders’ equity was $503.8 million as of September 30, 2003, compared with $581.4 million as of December 31, 2002. PMA Capital Insurance Company, PMA Capital Corporation’s directly held reinsurance subsidiary, had statutory surplus of $477 million at September 30, 2003. We have agreed with the Pennsylvania Insurance Department that PMA Capital Insurance Company will not pay dividends to PMA Capital Corporation without the Department’s prior approval. As of September 30, 2003, we had $21 million in cash at the holding company.

Book value per share was $16.08 as of September 30, 2003, compared with $18.56 as of December 31, 2002. Net unrealized gains on fixed maturities increased to $37.8 million after-tax, or $1.21 per share, as of September 30, 2003, compared to $33.3 million, or $1.06 per share at year-end 2002, reflecting the declining interest rate environment.

Revenues

Revenues for the third quarter of 2003 and 2002 were $316.2 million and $271.0 million, respectively. For the first nine months of 2003, revenues were $931.9 million, compared to $782.5 million for the same period in 2002. The 17% and 19% increase in revenues for the quarter and year-to-date periods primarily reflect higher net premiums earned. Additionally, pre-tax net realized investment gains were $1.4 million and $10.2 million for the third quarter and first nine months of 2003, compared to pre-tax net realized investment losses of $3.9 million and $20.0 million for the same periods last year.

2

As of September 30, 2003, total outstanding debt was $186.3 million, compared to $151.3 million at December 31, 2002. The components of our debt as of September 30, 2003 were as follows:

Amount  
(dollar amounts in thousands) Outstanding Maturity
4.25% convertible debt $86,250  2022 1
Trust preferred securities 42,500  2033   
8.50% senior notes 57,500  2018   
Total long-term debt $186,250 

(1) Holders of the Convertible Debt, at their option, may require us to repurchase all or a portion of their debentures on September 30, 2006, 2008, 2010, 2012 and 2017.

Segment Operating Results

Operating income (loss), which we define as net income (loss) under generally accepted accounting principles (GAAP) excluding net realized investment gains and losses, is the financial performance measure used by our management and Board of Directors to evaluate and assess the results of our insurance businesses. Accordingly, we report operating results by segment in the disclosures required under SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” Our management and Board of Directors use operating results as the measure of financial performance for our insurance operations because (i) net realized investment gains and losses are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains and losses that do not relate to the operations of the individual segments. Operating income (loss) does not replace net income (loss) as the GAAP measure of our consolidated results of operations. A reconciliation of our operating results as discussed below to GAAP net income (loss) is provided below.

Three months ended
September 30,
(unaudited)		 Nine months ended
September 30,
(unaudited)
(Dollars in thousands)   2003   2002   2003   2002  
Pre-tax operating income (loss): 
   PMA Re  $(113,673 ) $15,196   $(91,989 ) $41,902  
   The PMA Insurance Group  7,345   6,714   22,523   19,508  
   Corporate & Other  (6,259 ) (3,211 ) (16,497 ) (11,191 )
   Run-off Operations  3   (2 ) 1   (87,497 )
Net realized investment gains (losses)  1,392   (3,868 ) 10,198   (20,028 )
 
Pre-tax income (loss)  (111,192 ) 14,829   (75,764 ) (57,306 )
Income tax expense (benefit)  (14,786 ) 5,454   (2,227 ) (19,685 )
 
Net income (loss)  $(96,406 ) $9,375   $(73,537 ) $(37,621 )
 

3

The PMA Insurance Group

The PMA Insurance Group reported pre-tax operating income of $7.3 million and $22.5 million for the third quarter and first nine months of 2003, compared to $6.7 million and $19.5 million for the same periods last year. The increases are primarily due to improved underwriting results, partially offset by lower investment income.

Net premiums written increased 26% to $149.1 million for the third quarter of 2003, compared with $118.6 million for the third quarter of 2002. Net premiums written increased 22% to $462.8 million for the first nine months of 2003, compared with $378.7 million for the comparable period last year. The growth in premiums primarily reflects improved pricing in all lines of insurance business underwritten by The PMA Insurance Group and, to a lesser extent, an increase in the volume of risks underwritten.

The combined ratio on a GAAP basis in 2003 was 101.3% for the third quarter and 101.5 % for the first nine months, both of which improved from the corresponding periods last year when the GAAP combined ratio was 103.0% and 103.3%, respectively, as price increases continue to outpace loss cost trends.

Net investment income was $8.1 million and $24.6 million for the third quarter and first nine months of 2003, compared to $9.0 million and $27.0 million for the comparable periods of 2002. The declines in net investment income reflect lower invested asset yields, partially offset by a higher invested asset base.

PMA Re

As stated previously, we have decided to withdraw from the reinsurance business immediately. PMA Re reported pre-tax operating losses of $113.7 million for the third quarter and $92.0 million for the first nine months of 2003, compared to pre-tax operating income of $15.2 million and $41.9 million for the same periods last year. The results at PMA Re primarily reflect the $150 million ($97.5 million after-tax) reserve charge associated mainly with accident years 1997 to 2000.

Net premiums written were $139.8 million for the third quarter of 2003, compared with $153.9 million for the same period last year, reflecting lower premiums in the Traditional- and Specialty-Treaty units. For the first nine months of 2003, net premiums written were $470.8 million, compared to $453.2 million for the same period in 2002.

The combined ratio on a GAAP basis was 125.7% for the first nine months of 2003, compared with 98.8% last year. The combined ratio for 2003 includes 37 points due to the effect of the increase in loss reserves for prior accident year business.

Net investment income was $8.0 million and $25.0 million for the third quarter and first nine months of 2003, compared with $9.2 million and $37.1 million for the same periods last year. The declines in net investment income are due to lower yields on a growing invested asset base. Also impacting year-to-date net investment income is lower interest earned on funds held assets.

Corporate and Other

The Corporate and Other segment includes unallocated investment income and expenses, including debt service. Corporate and Other recorded pre-tax operating losses of $6.3 million and $16.5 million for the three and nine months ended September 30, 2003, respectively, compared to pre-tax operating losses of $3.2 million and $11.2 million for the same periods last year. Interest expense for three and nine months ended September 30, 2003 increased by $2.4 million and $5.3 million over the comparable periods last year, primarily due to a higher average amount of debt outstanding in 2003, compared with last year.

4

Run-off Operations

In May 2002, we announced our decision to withdraw from the excess and surplus lines marketplace previously served by our Caliber One operating segment. As a result of the decision to exit this business, this segment’s results have been reported as Run-off Operations. The results for Run-off Operations were essentially breakeven for the three and nine months ended September 30, 2003.

For the first nine months of 2002, the Run-off Operations recorded a pre-tax operating loss of $87.5 million, which included prior year loss development of $40 million in the first quarter of 2002 principally related to certain casualty lines of business; and a $43 million charge to exit from and run-off this business.

Conference Call with Investors

As a reminder, we will hold a conference call with investors beginning at 8:30 a.m. Eastern Time on Friday, November 7th to review our third quarter 2003 results and to provide our outlook for full year 2003. The conference call will be available via a live webcast over the Internet at www.pmacapital.com by entering the Investor Information section, clicking on News Releases and then clicking on the microphone icon. 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 along with 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.

Quarterly Statistical Supplement

Our Third Quarter Statistical Supplement, which provides more detailed historical information about us, is available on our website. Please see the Investor Information section of our website at www.pmacapital.com. You may also obtain a copy of this supplement by sending your request to:

     PMA Capital Corporation
     1735 Market Street
     Philadelphia, PA 19103
     Attention: Investor Relations

Alternatively, you may submit your request by telephone (215.665.5046) or by e-mail to InvestorRelations@pmacapital.com.

5

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:

•

the effect on The PMA Insurance Group's premium writings due to the downgrade of its financial strength rating by A.M. Best to B++;

•

the ability of the Company to have sufficient cash at the holding company to meet its debt service and other obligations, including any restrictions on receiving dividends from its insurance subsidiaries in an amount sufficient to meet such obligations;

•

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;

•

adequacy of reserves for claim liabilities;

•

adverse property and casualty loss development for events that we insured in prior years;

•

adequacy and collectibility of reinsurance that we purchased;

•

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 any future action with respect to our business taken by the Pennsylvania Insurance Department;

•

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;

•

ability to implement and maintain rate increases;

•

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;

•

our ability to predict and effectively manage claims related to insurance and reinsurance policies;

•

the uncertain nature of damage theories and loss amounts and the development of additional facts related to the attack on the World Trade Center;

•

uncertainty as to the price and availability of reinsurance on business we intend to write in the future, including reinsurance for terrorist acts;

•

severity of natural disasters and other catastrophes, including the impact of future acts of terrorism, in connection with insurance and reinsurance policies;

•

changes in general economic conditions, including the performance of financial markets, interest rates and the level of unemployment;

•

uncertainties related to possible terrorist activities or international hostilities; and

•

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.

You should not place undue reliance on any such forward-looking statements. Unless otherwise stated, we disclaim 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.

6

PMA Capital Corporation
GAAP Consolidated Balance Sheets
(Unaudited)

(Dollars in thousands, except per share data) September 30,
2003		 December 31,
2002
Assets:            
 Investments and cash:  
       Fixed maturities available for sale   $ 1,807,977   $ 1,529,924  
       Short-term investments    187,320    298,686  
       Short-term investments, loaned securities collateral    113,978    -  
       Cash    34,954    43,853  
       Total investments and cash    2,144,229    1,872,463  
                 
 Accrued investment income    23,764    18,600  
 Premiums receivable    379,041    363,675  
 Reinsurance receivables    1,252,928    1,295,083  
 Deferred income taxes    93,181    94,074  
 Deferred acquisition costs    105,089    89,222  
 Funds held by reinsureds    153,263    157,479  
 Other assets    255,292    215,198  
       Total assets   $ 4,406,787   $ 4,105,794  
Liabilities:  
 Unpaid losses and loss adjustment expenses   $ 2,486,776   $ 2,449,890  
 Unearned premiums    490,461    405,379  
 Debt    186,250    151,250  
 Accounts payable, accrued expenses  
       and other liabilities    297,028    253,175  
 Funds held under reinsurance treaties    313,688    249,670  
 Dividends to policyholders    14,851    14,998  
 Payable under securities loan agreements    113,960    42  
       Total liabilities    3,903,014    3,524,404  
Shareholders' Equity:  
 Class A Common stock    171,090    171,090  
 Additional paid-in capital    109,331    109,331  
 Retained earnings    235,607    319,014  
 Accumulated other comprehensive income    40,341    34,552  
 Notes receivable from officers    (64 )  (62 )
 Treasury stock, at cost    (52,532 )  (52,535 )
       Total shareholders' equity    503,773    581,390  
       Total liabilities and shareholders' equity   $ 4,406,787   $ 4,105,794  
 Shareholders' equity per share   $ 16.08   $ 18.56  

7

PMA Capital Corporation
GAAP Consolidated Statements of Operations
(Unaudited)

Three months ended September 30,
(Dollars in thousands, except per share data)      2003    2002  
 Gross premiums written   $ 352,380   $ 322,306  
 Net premiums written   $ 285,283   $ 268,851  
 Revenues:  
 Net premiums earned   $ 293,482   $ 252,731  
 Net investment income    17,167    18,087  
 Net realized investment gains (losses)    1,392    (3,868 )
 Other revenues    4,147    4,057  
       Total revenues    316,188    271,007  
 Expenses:  
 Losses and loss adjustment expenses    335,789    180,733  
 Acquisition expenses    63,221    55,390  
 Operating expenses    23,327    18,067  
 Dividends to policyholders    2,090    1,469  
 Interest expense    2,953    519  
       Total losses and expenses    427,380    256,178  
 Pre-tax income (loss)    (111,192 )  14,829  
 Income tax expense (benefit):  
       Current    (221 )  -  
       Deferred    (14,565 )  5,454  
 Total income tax expense (benefit)    (14,786 )  5,454  
 Net income (loss)   $ (96,406 ) $ 9,375  
 Net income (loss) per share:  
 Basic   $ (3.08 ) $ 0.30  
 Diluted   $ (3.08 ) $ 0.30  

8

PMA Capital Corporation
GAAP Consolidated Statements of Operations
(Unaudited)

Nine months ended September 30,
(Dollars in thousands, except per share data)      2003    2002  
 Gross premiums written   $ 1,133,973   $ 1,103,243  
 Net premiums written   $ 926,797   $ 859,995  
 Revenues:  
 Net premiums earned   $ 853,174   $ 727,205  
 Net investment income    52,592    63,873  
 Net realized investment gains (losses)    10,198    (20,028 )
 Other revenues    15,913    11,471  
       Total revenues    931,877    782,521  
 Expenses:  
 Losses and loss adjustment expenses    731,448    572,960  
 Acquisition expenses    191,656    161,202  
 Operating expenses    71,421    96,571  
 Dividends to policyholders    6,180    7,476  
 Interest expense    6,936    1,618  
       Total losses and expenses    1,007,641    839,827  
 Pre-tax loss    (75,764 )  (57,306 )
 Income tax benefit:  
       Current    -    -  
       Deferred    (2,227 )  (19,685 )
 Total income tax benefit    (2,227 )  (19,685 )
 Net loss   $ (73,537 ) $ (37,621 )
 Net loss per share:  
 Basic   $ (2.35 ) $ (1.20 )
 Diluted   $ (2.35 ) $ (1.20 )

9

PMA Capital Corporation
Selected Financial Data
(Unaudited)

Three months ended September 30,
(Dollars in thousands)      2003    2002  
Net premiums written:            
        The PMA Insurance Group   $ 149,130   $ 118,627  
        PMA Re    139,770    153,862  
        Run-off Operations    (3,389 )  (3,418 )
        Corporate and Other    (228 )  (220 )
 Consolidated   $ 285,283   $ 268,851  
Revenues:  
 Net premiums earned:  
        The PMA Insurance Group   $ 141,967   $ 103,190  
        PMA Re    153,360    135,511  
        Run-off Operations    (1,617 )  14,250  
        Corporate and Other    (228 )  (220 )
 Consolidated net premiums earned    293,482    252,731  
 Net investment income    17,167    18,087  
 Realized gains (losses)    1,392    (3,868 )
 Other revenues    4,147    4,057  
 Consolidated revenues   $ 316,188   $ 271,007  
Components of net income (loss):  
Pre-tax operating income (loss) (1):  
        The PMA Insurance Group   $ 7,345   $ 6,714  
        PMA Re    (113,673 )  15,196  
        Run-off Operations    3    (2 )
        Corporate and Other    (6,259 )  (3,211 )
 Realized gains (losses)    1,392    (3,868 )
 Pre-tax income (loss)    (111,192 )  14,829  
 Income tax expense (benefit)    (14,786 )  5,454  
Net income (loss)   $ (96,406 ) $ 9,375  
Weighted average common shares outstanding:  
        Basic    31,328,965    31,328,813  
        Diluted    31,328,965    31,621,993  

               (1) Operating income (loss), which is GAAP net income (loss) excluding net realized investments gains and losses, is the financial performance measure used by our management and our Board of Directors to evaluate and assess the results of our insurance businesses. As a result, we report operating income by segment in our segment footnote disclosures as required by SFAS No. 131 “Disclosure About Segments of and Enterprise and Related Information.” We use operating income (loss) as the measure of financial performance because (i) net realized investment gains (losses) are unpredictable and not necessarily indicative of current operating fundamentals or future performance and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains (losses) that do not relate to the operations of the individual segments. Operating income (loss) does not replace net income (loss) as the GAAP measure of our consolidated results of operations.


10

PMA Capital Corporation
Selected Financial Data
(Unaudited)

Nine months ended September 30,
(Dollars in thousands)      2003    2002  
 Net premiums written:  
        The PMA Insurance Group   $ 462,809   $ 378,727  
        PMA Re    470,813    453,169  
        Run-off Operations    (6,217 )  28,752  
        Corporate and Other    (608 )  (653 )
 Consolidated   $ 926,797   $ 859,995  
 Revenues:  
 Net premiums earned:  
        The PMA Insurance Group   $ 392,558   $ 309,530  
        PMA Re    455,603    386,543  
        Run-off Operations    5,621    31,785  
        Corporate and Other    (608 )  (653 )
 Consolidated net premiums earned    853,174    727,205  
 Net investment income    52,592    63,873  
 Realized gains (losses)    10,198    (20,028 )
 Other revenues    15,913    11,471  
 Consolidated revenues   $ 931,877   $ 782,521  
 Components of net loss:  
 Pre-tax operating income (loss) (1):  
        The PMA Insurance Group   $ 22,523   $ 19,508  
        PMA Re    (91,989 )  41,902  
        Run-off Operations    1    (87,497 )
        Corporate and Other    (16,497 )  (11,191 )
 Realized gains (losses)    10,198    (20,028 )
 Pre-tax loss    (75,764 )  (57,306 )
 Income tax benefit    (2,227 )  (19,685 )
 Net loss   $ (73,537 ) $ (37,621 )
 Weighted average common shares outstanding:  
        Basic    31,328,936    31,269,995  
        Diluted    31,328,936    31,269,995  

(1) Operating income (loss), which is GAAP net income (loss) excluding net realized investments gains and losses, is the financial performance measure used by our management and our Board of Directors to evaluate and assess the results of our insurance businesses. As a result, we report operating income by segment in our segment footnote disclosures as required by SFAS No. 131 “Disclosure About Segments of and Enterprise and Related Information.” We use operating income (loss ) as the measure of financial performance because (i) net realized investment gains (losses) are unpredictable and not necessarily indicative of current operating fundamentals or future performance and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains (losses) that do not relate to the operations of the individual segments. Operating income (loss) does not replace net income (loss) as the GAAP measure of our consolidated results of operations.



11

EX-99 4 exhibit99-2.txt EXHIBIT 99.2 - -------------------------------------------------------------------------------- PMA Capital Corporation Statistical Supplement Third Quarter - 2003 - -------------------------------------------------------------------------------- Table of Contents ----------------- Page Consolidated Highlights: Selected Financial Data 1 Selected Financial Data - YTD 2 Consolidated Statements of Operations - Per Share Data 3 Consolidated Statements of Operations 4 Consolidated Statements of Operations - YTD 5 Consolidated Balance Sheets 6 Invested Assets & Net Investment Income 7 Debt 7 Segment Information: Statements of Operations - Consolidating - YTD 8 - 9 Insurance Ratios - Consolidating - YTD 10 - 11 Statements of Operations - Consolidating - Third Quarter 12 - 13 Insurance Ratios - Consolidating - Third Quarter 14 - 15 Statements of Operations - PMA Re 16 Insurance Ratios - PMA Re 17 Statements of Operations - PMA Insurance Group 18 Insurance Ratios - PMA Insurance Group 19 Statements of Operations - Run-off Operations 20 Statements of Operations - Corporate & Other 21 Operating Cash Flow Information: Operating Cash Flows - Consolidated 22 Operating Cash Flows - PMA Re 23 Operating Cash Flows - PMA Insurance Group 24 Operating Cash Flows - Run-off Operations 25 Statutory Financial Information: Statutory Financial Information 27 Statutory Net Premiums Written by Product 28 Statutory Surplus 29 Other Information: Industry Ratings and Market Information 30 Legend: NM - Not Meaningful NA - Not Applicable Note: Operating income (loss), which we define as net income (loss) under GAAP excluding net realized investment gains and losses, is the financial performance measure used by our management and Board of Directors to evaluate and assess the results of our insurance businesses. Accordingly, we report operating income by segment in the disclosures required under SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." Our management and Board of Directors use operating income (loss) as the measure of financial performance for our insurance operations because (i) net realized investment gains and losses are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains and losses that do not relate to the operations of the individual segments. Operating income (loss) does not replace net income (loss) as the GAAP measure of our consolidated results of operations. See page 1 and 2 for reconciliations of operating results by segment to GAAP net income (loss).
PMA Capital Corporation Selected Financial Data (Dollar Amounts in Thousands, Except Per Share Data) 3rd 4th 1st 2nd 3rd % Change Quarter Quarter Quarter Quarter Quarter 3rd 2002 2002 2003 2003 2003 Quarter ------------------------------------------------------------------------- Net Premiums Written by Segment: PMA Re $ 153,862 $ 185,870 $ 158,579 $ 172,464 $ 139,770 -9.2% PMA Insurance Group 118,627 73,549 194,239 119,440 149,130 25.7% Run-off Operations 1 (3,418) (14,189) (1,704) (1,124) (3,389) 0.8% Corporate & Other (220) (228) (256) (124) (228) -3.6% --------- --------- --------- --------- --------- ------ Net premiums written $ 268,851 $ 245,002 $ 350,858 $ 290,656 $ 285,283 6.1% ========= ========= ========= ========= ========= ====== Major Components of Net Income (Loss): Pre-tax operating income (loss) by segment: PMA Re $ 15,196 $ (28,480) $ 8,577 $ 13,107 $(113,673) NM PMA Insurance Group 6,714 5,838 8,340 6,838 7,345 9.4% Run-off Operations 1 (2) (4) 1 (3) 3 NM Corporate & Other (3,211) (3,148) (4,674) (5,564) (6,259) -94.9% --------- --------- --------- --------- --------- ------ Pre-tax operating income (loss) 18,697 (25,794) 12,244 14,378 (112,584) NM Net realized investment gains (losses) (3,868) 3,943 4,355 4,451 1,392 NM --------- --------- --------- --------- --------- ------ Pre-tax income (loss) 14,829 (21,851) 16,599 18,829 (111,192) NM Income tax expense (benefit) 5,454 (11,448) 5,897 6,662 (14,786) NM --------- --------- --------- --------- --------- ------ Net income (loss) $ 9,375 $ (10,403) $ 10,702 $ 12,167 $ (96,406) NM ========= ========= ========= ========= ========= ------ After-tax operating income (loss) $ 11,889 $ (12,966) $ 7,871 $ 9,274 $ (97,311) NM ========= ========= ========= ========= ========= ====== Diluted Earnings (Loss) Per Share: Net income (loss) $ 0.30 $ (0.33) $ 0.34 $ 0.39 $ (3.08) NM Less the impact of: Realized gains (losses) after tax (0.08) 0.08 0.09 0.09 0.03 NM --------- --------- --------- --------- --------- ------ After-tax operating income (loss) $ 0.38 $ (0.41) $ 0.25 $ 0.30 $ (3.11) NM ========= ========= ========= ========= ========= ====== Capitalization: Debt $ 55,000 $ 151,250 $ 131,250 $ 176,250 $ 186,250 238.6% Shareholders' equity excluding FAS 115 unrealized gain 561,089 548,128 555,198 565,081 465,943 -17.0% --------- --------- --------- --------- --------- ------ Total capitalization excluding FAS 115 unrealized gain 616,089 699,378 686,448 741,331 652,193 5.9% FAS 115 unrealized gain 32,784 33,262 33,170 52,666 37,830 15.4% --------- --------- --------- --------- --------- ------ Total capitalization including FAS 115 unrealized gain $ 648,873 $ 732,640 $ 719,618 $ 793,997 $ 690,023 6.3% ========= ========= ========= ========= ========= ====== Book Value Per Share: Excluding FAS 115 unrealized gain $ 17.91 $ 17.50 $ 17.72 $ 18.04 $ 14.87 -17.0% Including FAS 115 unrealized gain $ 18.96 $ 18.56 $ 18.78 $ 19.72 $ 16.08 -15.2% Debt to Total Capital: Excluding FAS 115 unrealized gain 8.9% 21.6% 19.1% 23.8% 28.6% 221.3% Including FAS 115 unrealized gain 8.5% 20.6% 18.2% 22.2% 27.0% 217.6% Interest Coverage: Income before interest and income taxes to interest expense 29.57 NM 10.44 9.46 NM NM Operating income before interest and income taxes to interest expense 37.03 NM 7.96 7.46 NM NM 1 Formerly known as Caliber One. 1
PMA Capital Corporation Selected Financial Data (Dollar Amounts in Thousands, Except Per Share Data) Nine Nine % Change Months Months Nine 2003 2002 Months ----------------------------------- Net Premiums Written by Segment: PMA Re $ 470,813 $ 453,169 3.9% PMA Insurance Group 462,809 378,727 22.2% Run-off Operations 1 (6,217) 28,752 NM Corporate & Other (608) (653) 6.9% --------- --------- ------ Net premiums written $ 926,797 $ 859,995 7.8% ========= ========= ====== Major Components of Net Income (Loss): Pre-tax operating income (loss) by segment: PMA Re $ (91,989) $ 41,902 NM PMA Insurance Group 22,523 19,508 15.5% Run-off Operations 1 1 (87,497) NM Corporate & Other (16,497) (11,191) -47.4% --------- --------- ------ Pre-tax operating loss (85,962) (37,278) NM Net realized investment gains (losses) 10,198 (20,028) NM --------- --------- ------ Pre-tax loss (75,764) (57,306) -32.2% Income tax benefit (2,227) (19,685) 88.7% --------- --------- ------ Net loss $ (73,537) $ (37,621) -95.5% ========= ========= ====== After-tax operating loss $ (80,166) $ (24,603) NM ========= ========= ====== Diluted Earnings (Loss) Per Share: Net loss $ (2.35) $ (1.20) -95.8% Less the impact of: Realized gains (losses) after tax 0.21 (0.41) NM --------- --------- ------ After-tax operating loss $ (2.56) $ (0.79) NM ========= ========= ====== 1 Formerly known as Caliber One. 2
PMA Capital Corporation Consolidated Statements of Operations - Per Share Data 3rd 4th 1st 2nd Quarter Quarter Quarter Quarter 2002 2002 2003 2003 --------------------------------------------------------------------------- Diluted Earnings (Loss) Per Share: Net income (loss) $ 0.30 $ (0.33) $ 0.34 $ 0.39 =============== =============== =============== =============== Pre-tax operating income (loss) $ 0.59 $ (0.82) $ 0.39 $ 0.46 =============== =============== =============== =============== After-tax operating income (loss) $ 0.38 $ (0.41) $ 0.25 $ 0.30 =============== =============== =============== =============== Diluted weighted average common shares outstanding 31,621,993 31,328,922 31,328,922 31,331,197 =============== =============== =============== =============== - -------------------------------------------------------------------------------------------------------------------------------- Dividends declared: Class A Common stock $ 0.105 $ 0.105 $ 0.105 $ 0.105 Actual common shares issued and outstanding 31,328,922 31,328,922 31,328,922 31,328,922 =============== =============== =============== =============== - -------------------------------------------------------------------------------------------------------------------------------- Class A Common Stock prices: High $ 20.50 $ 15.30 $ 15.00 $ 12.30 Low $ 13.05 $ 12.37 $ 6.67 $ 6.44 Close $ 15.00 $ 14.33 $ 6.77 $ 12.12
3rd Nine Nine Quarter Months Months 2003 2003 2002 -------------------------------------------------------- Diluted Earnings (Loss) Per Share: Net income (loss) $ (3.08) $ (2.35) $ (1.20) =============== =============== =============== Pre-tax operating income (loss) $ (3.59) $ (2.74) $ (1.19) =============== =============== =============== After-tax operating income (loss) $ (3.11) $ (2.56) $ (0.79) =============== =============== =============== Diluted weighted average common shares outstanding 31,328,965 31,328,936 31,269,995 =============== =============== =============== - -------------------------------------------------------------------------------------------------------------- Dividends declared: Class A Common stock $ 0.105 $ 0.315 $ 0.315 Actual common shares issued and outstanding 31,329,063 31,329,063 31,328,922 =============== =============== =============== - -------------------------------------------------------------------------------------------------------------- Class A Common Stock prices: High $ 12.85 $ 15.00 $ 25.99 Low $ 11.71 $ 6.44 $ 13.05 Close $ 12.53 $ 12.53 $ 15.00 3
PMA Capital Corporation Consolidated Statements of Operations (In Thousands) 3rd 4th 1st 2nd 3rd % Change Quarter Quarter Quarter Quarter Quarter 3rd 2002 2002 2003 2003 2003 Quarter - -------------------------------------------------------------------------------------------------------------------- Gross Premiums Written $ 322,306 $ 283,303 $ 419,694 $ 361,899 $ 352,380 9.3% ========= ========= ========= ========= ========= ==== Net Premiums Written $ 268,851 $ 245,002 $ 350,858 $ 290,656 $ 285,283 6.1% ========= ========= ========= ========= ========= ==== Revenues: Net premiums earned $ 252,731 $ 263,806 $ 274,070 $ 285,622 $ 293,482 16.1% Net investment income 18,087 21,008 17,645 17,780 17,167 -5.1% Net realized investment gains (losses) (3,868) 3,943 4,355 4,451 1,392 NM Other revenues 4,057 3,859 7,000 4,766 4,147 2.2% --------- --------- --------- --------- --------- ---- Total revenues 271,007 292,616 303,070 312,619 316,188 16.7% --------- --------- --------- --------- --------- ---- Expenses: Losses and loss adjustment expenses 180,733 250,698 202,585 193,074 335,789 85.8% Acquisition expenses 55,390 55,782 56,220 72,215 63,221 14.1% Operating expenses 18,067 6,237 23,872 24,222 23,327 29.1% Dividends to policyholders 1,469 111 2,036 2,054 2,090 42.3% Interest expense 519 1,639 1,758 2,225 2,953 NM --------- --------- --------- --------- --------- ---- Total losses and expenses 256,178 314,467 286,471 293,790 427,380 66.8% --------- --------- --------- --------- --------- ---- Pre-tax income (loss) 14,829 (21,851) 16,599 18,829 (111,192) NM --------- --------- --------- --------- --------- ---- Income tax expense (benefit): Current -- (3,606) -- 221 (221) NM Deferred 5,454 (7,842) 5,897 6,441 (14,565) NM --------- --------- --------- --------- --------- ---- Total income tax expense (benefit) 5,454 (11,448) 5,897 6,662 (14,786) NM --------- --------- --------- --------- --------- ---- Net income (loss) $ 9,375 $ (10,403) $ 10,702 $ 12,167 $ (96,406) NM ========= ========= ========= ========= ========= ==== Pre-tax operating income (loss) $ 18,697 $ (25,794) $ 12,244 $ 14,378 $(112,584) NM ========= ========= ========= ========= ========= ==== After-tax operating income (loss) $ 11,889 $ (12,966) $ 7,871 $ 9,274 $ (97,311) NM ========= ========= ========= ========= ========= ==== 4
PMA Capital Corporation Consolidated Statements of Operations (In Thousands) Nine Nine % Change Months Months Nine 2003 2002 Months ----------------------------------------- Gross Premiums Written $ 1,133,973 $ 1,103,243 2.8% =========== =========== ===== Net Premiums Written $ 926,797 $ 859,995 7.8% =========== =========== ===== Revenues: Net premiums earned $ 853,174 $ 727,205 17.3% Net investment income 52,592 63,873 -17.7% Net realized investment gains (losses) 10,198 (20,028) NM Other revenues 15,913 11,471 38.7% ----------- ----------- ----- Total revenues 931,877 782,521 19.1% ----------- ----------- ----- Expenses: Losses and loss adjustment expenses 731,448 572,960 27.7% Acquisition expenses 191,656 161,202 18.9% Operating expenses 71,421 96,571 -26.0% Dividends to policyholders 6,180 7,476 -17.3% Interest expense 6,936 1,618 NM ----------- ----------- ----- Total losses and expenses 1,007,641 839,827 20.0% ----------- ----------- ----- Pre-tax loss (75,764) (57,306) -32.2% ----------- ----------- ----- Income tax benefit: Current -- -- NM Deferred (2,227) (19,685) 88.7% ----------- ----------- ----- Total income tax benefit (2,227) (19,685) 88.7% ----------- ----------- ----- Net loss $ (73,537) $ (37,621) -95.5% ----------- ----------- ----- Pre-tax operating loss $ (85,962) $ (37,278) NM =========== =========== ===== After-tax operating loss $ (80,166) $ (24,603) NM =========== =========== ===== 5
PMA Capital Corporation Consolidated Balance Sheets (In Thousands) 3rd 4th 1st 2nd 3rd Quarter Quarter Quarter Quarter Quarter 2002 2002 2003 2003 2003 ------------------------------------------------------------------- Assets: Investments in fixed maturities available for sale $ 1,509,862 $ 1,529,924 $ 1,641,593 $ 1,741,879 $ 1,807,977 Short-term investments 200,403 298,686 199,782 282,366 187,320 Short-term investments, loaned securities collateral 214,087 -- 108,513 185,566 113,978 Cash 14,404 43,853 4,635 12,556 34,954 ----------- ----------- ----------- ----------- ----------- Total investments and cash 1,938,756 1,872,463 1,954,523 2,222,367 2,144,229 Accrued investment income 21,405 18,600 22,426 19,357 23,764 Premiums receivable 376,293 363,675 457,528 394,065 379,041 Reinsurance receivables 1,260,399 1,295,083 1,314,103 1,307,506 1,252,928 Deferred income taxes 86,672 94,074 88,410 70,928 93,181 Deferred acquisition costs 87,236 89,222 103,275 108,740 105,089 Funds held by reinsureds 159,750 157,479 168,597 165,533 153,263 Other assets 185,943 215,198 222,595 249,110 255,292 ----------- ----------- ----------- ----------- ----------- Total assets $ 4,116,454 $ 4,105,794 $ 4,331,457 $ 4,537,606 $ 4,406,787 =========== =========== =========== =========== =========== Liabilities: Unpaid losses and loss adjustment expenses $ 2,304,309 $ 2,449,890 $ 2,448,147 $ 2,430,276 $ 2,486,776 Unearned premiums 442,485 405,379 484,789 499,960 490,461 Debt 55,000 151,250 131,250 176,250 186,250 Accounts payable, accrued expenses and other liabilities 232,688 253,175 281,920 301,049 297,028 Funds held under reinsurance treaties 255,950 249,670 273,469 311,081 313,688 Dividends to policyholders 16,755 14,998 14,981 15,669 14,851 Payable under securities loan agreements 215,394 42 108,533 185,574 113,960 ----------- ----------- ----------- ----------- ----------- Total liabilities 3,522,581 3,524,404 3,743,089 3,919,859 3,903,014 ----------- ----------- ----------- ----------- ----------- Shareholders' Equity: Class A Common stock 171,090 171,090 171,090 171,090 171,090 Additional paid-in capital 109,331 109,331 109,331 109,331 109,331 Retained earnings 332,566 319,014 326,425 335,304 235,607 Accumulated other comprehensive income 33,483 34,552 34,119 54,621 40,341 Notes receivable from officers (62) (62) (62) (64) (64) Treasury stock, at cost (52,535) (52,535) (52,535) (52,535) (52,532) ----------- ----------- ----------- ----------- ----------- Total shareholders' equity 593,873 581,390 588,368 617,747 503,773 ----------- ----------- ----------- ----------- ----------- Total liabilities and shareholders' equity $ 4,116,454 $ 4,105,794 $ 4,331,457 $ 4,537,606 $ 4,406,787 =========== =========== =========== =========== =========== 6
PMA Capital Corporation Invested Assets & Net Investment Income (Dollars in Thousands) 3rd 4th 1st 2nd 3rd Quarter Quarter Quarter Quarter Quarter 2002 2002 2003 2003 2003 ---------------------------------------------------------------------------------- Total Investments & Cash As Reported $ 1,938,756 $ 1,872,463 $ 1,954,523 $ 2,222,367 $ 2,144,229 Less: Securities Lending Activity 215,394 42 108,533 185,574 113,960 Unrealized Gain 50,437 51,172 51,031 81,025 58,200 ----------- ----------- ----------- ----------- ----------- Total Adjusted Investments & Cash $ 1,672,925 $ 1,821,249 $ 1,794,959 $ 1,955,768 $ 1,972,069 =========== =========== =========== =========== =========== Net Investment Income As Reported $ 18,087 $ 21,008 $ 17,645 $ 17,780 $ 17,167 Funds Held: Assumed 16 5,997 1,036 1,940 1,316 Ceded (3,492) (5,740) (3,859) (3,567) (3,551) ----------- ----------- ----------- ----------- ----------- Total Funds Held (3,476) 257 (2,823) (1,627) (2,235) ----------- ----------- ----------- ----------- ----------- Total Adjusted Investment Income $ 21,563 $ 20,751 $ 20,468 $ 19,407 $ 19,402 =========== =========== =========== =========== =========== Yield As Reported 3.75% 4.49% 3.69% 3.41% 3.15% Investment Portfolio 5.18% 4.56% 4.53% 4.14% 3.95% Duration (in years) 3.8 3.5 3.8 3.8 3.9 Nine Nine Months Months 2003 2002 ---------------------------- Total Investments & Cash As Reported $ 2,144,229 $ 1,938,756 Less: Securities Lending Activity 113,960 215,394 Unrealized Gain 58,200 50,437 ----------- ----------- Total Adjusted Investments & Cash $ 1,972,069 $ 1,672,925 =========== =========== Net Investment Income As Reported $ 52,592 $ 63,873 Funds Held: Assumed 4,292 8,876 Ceded (10,977) (12,022) ----------- ----------- Total Funds Held (6,685) (3,146) ----------- ----------- Total Adjusted Investment Income $ 59,277 $ 67,019 =========== =========== Yield As Reported 3.42% 4.51% Investment Portfolio 4.19% 5.24% Duration (in years) 3.9 3.8
- -------------------------------------------------------------------------------- PMA Capital Corporation Debt (Dollars in Thousands) Amount Outstanding Maturity ------------------------ 4.25% convertible debt $ 86,250 2022 1 Trust preferred securities 42,500 2033 8.50% senior notes 57,500 2018 -------- Total long-term debt $186,250 ======== 1 Holders of the Convertible Debt, at their option, may require us to repurchase all or a portion of their debentures on September 30, 2006, 2008, 2010, 2012 and 2017. 7
PMA Capital Corporation Statements of Operations - Consolidating Nine Months Ended September 30, 2003 (In Thousands) PMA Insurance Corporate Run-off PMA Re Group & Other 1 Operations 2 Consolidated ----------------------------------------------------------------------- Gross Premiums Written $ 617,090 $ 516,947 $ (608) $ 544 $ 1,133,973 =========== =========== =========== =========== =========== Net Premiums Written $ 470,813 $ 462,809 $ (608) $ (6,217) $ 926,797 =========== =========== =========== =========== =========== Revenues: Net premiums earned $ 455,603 $ 392,558 $ (608) $ 5,621 $ 853,174 Net investment income 25,032 24,608 1,512 1,440 52,592 Other revenues -- 13,086 327 2,500 15,913 ----------- ----------- ----------- ----------- ----------- Operating revenues 480,635 430,252 1,231 9,561 921,679 ----------- ----------- ----------- ----------- ----------- Losses and Expenses: Losses and loss adjustment expenses 437,358 288,433 -- 5,657 731,448 Acquisition expenses 124,508 66,221 -- 927 191,656 Operating expenses 10,758 46,895 10,792 2,976 71,421 Dividends to policyholders -- 6,180 -- -- 6,180 ----------- ----------- ----------- ----------- ----------- Total losses and expenses 572,624 407,729 10,792 9,560 1,000,705 ----------- ----------- ----------- ----------- ----------- Operating income (loss) before income taxes and interest expense (91,989) 22,523 (9,561) 1 (79,026) Interest expense -- -- 6,936 -- 6,936 ----------- ----------- ----------- ----------- ----------- Pre-tax operating income (loss) $ (91,989) $ 22,523 $ (16,497) $ 1 (85,962) =========== =========== =========== =========== Net realized investment gains 10,198 ----------- Pre-tax loss $ (75,764) =========== 1 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 2 Formerly known as Caliber One. 8
PMA Capital Corporation Statements of Operations - Consolidating Nine Months Ended September 30, 2002 (In Thousands) PMA Insurance Corporate Run-off PMA Re Group & Other 1 Operations 2 Consolidated ----------------------------------------------------------------------- Gross Premiums Written $ 574,973 $ 423,446 $ (653) $ 105,477 $ 1,103,243 =========== =========== =========== =========== =========== Net Premiums Written $ 453,169 $ 378,727 $ (653) $ 28,752 $ 859,995 =========== =========== =========== =========== =========== Revenues: Net premiums earned $ 386,543 $ 309,530 $ (653) $ 31,785 $ 727,205 Net investment income 37,148 27,002 (853) 576 63,873 Other revenues -- 10,887 584 -- 11,471 ----------- ----------- ----------- ----------- ----------- Operating revenues 423,691 347,419 (922) 32,361 802,549 ----------- ----------- ----------- ----------- ----------- Losses and Expenses: Losses and loss adjustment expenses 271,430 230,549 -- 70,981 572,960 Acquisition expenses 98,137 54,121 -- 8,944 161,202 Operating expenses 12,222 35,765 8,651 39,933 96,571 Dividends to policyholders -- 7,476 -- -- 7,476 ----------- ----------- ----------- ----------- ----------- Total losses and expenses 381,789 327,911 8,651 119,858 838,209 ----------- ----------- ----------- ----------- ----------- Operating income (loss) before income taxes and interest expense 41,902 19,508 (9,573) (87,497) (35,660) Interest expense -- -- 1,618 -- 1,618 ----------- ----------- ----------- ----------- ----------- Pre-tax operating income (loss) $ 41,902 $ 19,508 $ (11,191) $ (87,497) (37,278) =========== =========== =========== =========== Net realized investment losses (20,028) ----------- Pre-tax loss $ (57,306) =========== 1 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 2 Formerly known as Caliber One. 9
PMA Capital Corporation Insurance Ratios Nine Months Ended September 30, 2003 PMA Insurance PMA Re Group 1 --------------------- Ratios - GAAP Basis: Loss and LAE ratio 96.0% 73.5% -------- -------- Expense ratio: Acquisition expenses 27.3% 16.9% Operating expenses 2.4% 9.5% -------- -------- Total expense ratio 29.7% 26.4% -------- -------- Policyholders' dividend ratio NA 1.6% -------- -------- Combined ratio 125.7% 101.5% ======== ======== Net investment income ratio -5.5% -6.3% -------- -------- Operating ratio 120.2% 95.2% ======== ======== 1 The operating expense ratio and the combined ratio are computed based on $37.6 million of insurance-related operating expenses. 10
PMA Capital Corporation Insurance Ratios Nine Months Ended September 30, 2002 PMA Insurance PMA Re Group 1 -------------------- Ratios - GAAP Basis: Loss and LAE ratio 70.2% 74.5% -------- -------- Expense ratio: Acquisition expenses 25.4% 17.5% Operating expenses 3.2% 8.9% -------- -------- Total expense ratio 28.6% 26.4% -------- -------- Policyholders' dividend ratio NA 2.4% -------- -------- Combined ratio 98.8% 103.3% ======== ======== Net investment income ratio -9.6% -8.7% -------- -------- Operating ratio 89.2% 94.6% ======== ======== 1 The operating expense ratio and the combined ratio are computed based on $27.5 million of insurance-related operating expenses. 11
PMA Capital Corporation Statements of Operations - Consolidating Three Months Ended September 30, 2003 (In Thousands) PMA Insurance Corporate Run-off PMA Re Group & Other 1 Operations 2 Consolidated -------------------------------------------------------------- Gross Premiums Written $ 183,111 $ 169,258 $ (228) $ 239 $ 352,380 ========= ========= ========= ========= ========= Net Premiums Written $ 139,770 $ 149,130 $ (228) $ (3,389) $ 285,283 ========= ========= ========= ========= ========= Revenues: Net premiums earned $ 153,360 $ 141,967 $ (228) $ (1,617) $ 293,482 Net investment income 7,990 8,134 492 551 17,167 Other revenues -- 4,078 69 -- 4,147 --------- --------- --------- --------- --------- Operating revenues 161,350 154,179 333 (1,066) 314,796 --------- --------- --------- --------- --------- Losses and Expenses: Losses and loss adjustment expenses 231,403 105,197 -- (811) 335,789 Acquisition expenses 39,406 23,815 -- -- 63,221 Operating expenses 4,214 15,732 3,639 (258) 23,327 Dividends to policyholders -- 2,090 -- -- 2,090 --------- --------- --------- --------- --------- Total losses and expenses 275,023 146,834 3,639 (1,069) 424,427 --------- --------- --------- --------- --------- Operating income (loss) before income taxes and interest expense (113,673) 7,345 (3,306) 3 (109,631) Interest expense -- -- 2,953 -- 2,953 --------- --------- --------- --------- --------- Pre-tax operating income (loss) $(113,673) $ 7,345 $ (6,259) $ 3 (112,584) ========= ========= ========= ========= Net realized investment gains 1,392 --------- Pre-tax loss $(111,192) ========= 1 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 2 Formerly known as Caliber One. 12
PMA Capital Corporation Statements of Operations - Consolidating Three Months Ended September 30, 2002 (In Thousands) PMA Insurance Corporate Run-off PMA Re Group & Other 1 Operations 2 Consolidated -------------------------------------------------------------- Gross Premiums Written $ 186,499 $ 130,510 $ (220) $ 5,517 $ 322,306 ========= ========= ========= ========= ========= Net Premiums Written $ 153,862 $ 118,627 $ (220) $ (3,418) $ 268,851 ========= ========= ========= ========= ========= Revenues: Net premiums earned $ 135,511 $ 103,190 $ (220) $ 14,250 $ 252,731 Net investment income 9,239 8,971 (237) 114 18,087 Other revenues -- 3,989 68 -- 4,057 --------- --------- --------- --------- --------- Operating revenues 144,750 116,150 (389) 14,364 274,875 --------- --------- --------- --------- --------- Losses and Expenses: Losses and loss adjustment expenses 92,574 78,121 -- 10,038 180,733 Acquisition expenses 33,679 18,039 -- 3,672 55,390 Operating expenses 3,301 11,807 2,303 656 18,067 Dividends to policyholders -- 1,469 -- -- 1,469 --------- --------- --------- --------- --------- Total losses and expenses 129,554 109,436 2,303 14,366 255,659 --------- --------- --------- --------- --------- Operating income (loss) before income taxes and interest expense 15,196 6,714 (2,692) (2) 19,216 Interest expense -- -- 519 -- 519 --------- --------- --------- --------- --------- Pre-tax operating income (loss) $ 15,196 $ 6,714 $ (3,211) $ (2) 18,697 ========= ========= ========= ========= Net realized investment losses (3,868) --------- Pre-tax income $ 14,829 ========= 1 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 2 Formerly known as Caliber One. 13
PMA Capital Corporation Insurance Ratios Three Months Ended September 30, 2003 PMA Insurance PMA Re Group 1 ------------------------ Ratios - GAAP Basis: Loss and LAE ratio 150.9% 74.1% -------- -------- Expense ratio: Acquisition expenses 25.7% 16.8% Operating expenses 2.7% 8.9% -------- -------- Total expense ratio 28.4% 25.7% -------- -------- Policyholders' dividend ratio NA 1.5% -------- -------- Combined ratio 179.3% 101.3% ======== ======== Net investment income ratio -5.2% -5.7% -------- -------- Operating ratio 174.1% 95.6% ======== ======== 1 The operating expense ratio and the combined ratio are computed based on $12.7 million of insurance-related operating expenses. 14 PMA Capital Corporation Insurance Ratios Three Months Ended September 30, 2002 PMA Insurance PMA Re Group 1 --------------------- Ratios - GAAP Basis: Loss and LAE ratio 68.3% 75.7% -------- -------- Expense ratio: Acquisition expenses 24.9% 17.5% Operating expenses 2.4% 8.4% -------- -------- Total expense ratio 27.3% 25.9% -------- -------- Policyholders' dividend ratio NA 1.4% -------- -------- Combined ratio 95.6% 103.0% ======== ======== Net investment income ratio -6.8% -8.7% -------- -------- Operating ratio 88.8% 94.3% ======== ======== 1 The operating expense ratio and the combined ratio are computed based on $8.7 million of insurance-related operating expenses. 15
PMA Capital Corporation Statements of Operations - PMA Re (Dollar Amounts in Thousands) 3rd 4th 1st 2nd 3rd Nine Nine % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 3rd Nine 2002 2002 2003 2003 2003 2003 2002 Quarter Months ------------------------------------------------------------------------------------------------------- Gross Premiums Written $ 186,499 $ 201,814 $ 206,119 $ 227,860 $ 183,111 $ 617,090 $ 574,973 -1.8% 7.3% ======== ========= ======= ======== ========== ========= ========= ====== ====== Net Premiums Written $ 153,862 $ 185,870 $ 158,579 $ 172,464 $ 139,770 $ 470,813 $ 453,169 -9.2% 3.9% ======== ========= ======= ======== ========== ========= ========= ====== ====== Revenues: Net premiums earned $ 135,511 $ 164,970 $ 151,239 $ 151,004 $ 153,360 $ 455,603 $ 386,543 13.2% 17.9% Net investment income 9,239 11,588 8,431 8,611 7,990 25,032 37,148 -13.5% -32.6% -------- --------- ------- -------- ---------- --------- --------- ------ ------ Operating revenues 144,750 176,558 159,670 159,615 161,350 480,635 423,691 11.5% 13.4% -------- --------- ------- -------- ---------- --------- --------- ------ ------ Losses and Expenses: Losses and loss adjustment expenses 92,574 167,798 112,675 93,280 231,403 437,358 271,430 150.0% 61.1% Acquisition expenses 33,679 36,009 35,773 49,329 39,406 124,508 98,137 17.0% 26.9% Operating expenses 3,301 1,231 2,645 3,899 4,214 10,758 12,222 27.7% -12.0% -------- --------- ------- -------- ---------- --------- --------- ------ ------ Total losses and expenses 129,554 205,038 151,093 146,508 275,023 572,624 381,789 112.3% 50.0% -------- --------- ------- -------- ---------- --------- --------- ------ ------ Pre-tax operating income (loss) $ 15,196 $ (28,480) $ 8,577 $ 13,107 $ (113,673) (91,989) 41,902 NM NM ======== ========= ======= ======== ========== ========= ========= ====== ======
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PMA Capital Corporation Insurance Ratios - PMA Re 3rd 4th 1st 2nd 3rd Nine Nine Point Chg. Point Chg. Quarter Quarter Quarter Quarter Quarter Months Months 3rd Quarter Nine Months 2002 2002 2003 2003 2003 2003 2002 Better (Worse) Better (Worse) ------------------------------------------------------------------------------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 68.3% 101.7% 74.5% 61.8% 150.9% 96.0% 70.2% (82.6) (25.8) ---- ----- ---- ---- ----- ----- ---- ----- ----- Expense ratio: Acquisition expenses 24.9% 21.8% 23.7% 32.7% 25.7% 27.3% 25.4% (0.8) (1.9) Operating expenses 2.4% 0.8% 1.7% 2.5% 2.7% 2.4% 3.2% (0.3) 0.8 ---- ----- ---- ---- ----- ----- ---- ----- ----- Total expense ratio 27.3% 22.6% 25.4% 35.2% 28.4% 29.7% 28.6% (1.1) (1.1) ---- ----- ---- ---- ----- ----- ---- ----- ----- Combined ratio 95.6% 124.3% 99.9% 97.0% 179.3% 125.7% 98.8% (83.7) (26.9) ==== ===== ==== ==== ===== ===== ==== ===== ===== Net investment income ratio -6.8% -7.0% -5.6% -5.7% -5.2% -5.5% -9.6% (1.6) (4.1) ---- ----- ---- ---- ----- ----- ---- ----- ----- Operating ratio 88.8% 117.3% 94.3% 91.3% 174.1% 120.2% 89.2% (85.3) (31.0) ==== ===== ==== ==== ===== ===== ==== ===== =====
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PMA Capital Corporation Statements of Operations - PMA Insurance Group (Dollar Amounts in Thousands) 3rd 4th 1st 2nd 3rd Nine Nine % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 3rd Nine 2002 2002 2003 2003 2003 2003 2002 Quarter Months ---------------------------------------------------------------------------------------------------- Gross Premiums Written $130,510 $ 91,886 $213,721 $133,968 $169,258 $516,947 $423,446 29.7% 22.1% ======== ======== ======== ======== ======== ======== ======== ======== ======= Net Premiums Written $118,627 $ 73,549 $194,239 $119,440 $149,130 $462,809 $378,727 25.7% 22.2% ======== ======== ======== ======== ======== ======== ======== ========= ====== Revenues: Net premiums earned $103,190 $100,736 $116,241 $134,350 141,967 $392,558 $309,530 37.6% 26.8% Net investment income 8,971 8,611 8,271 8,203 8,134 24,608 27,002 -9.3% -8.9% Other revenues 3,989 3,807 4,431 4,577 4,078 13,086 10,887 2.2% 20.2% -------- -------- -------- -------- -------- -------- -------- ------ ---- Operating revenues 116,150 113,154 128,943 147,130 154,179 430,252 347,419 32.7% 23.8% -------- -------- -------- -------- -------- -------- -------- ------ ---- Losses and Expenses: Losses and loss adjustment expenses 78,121 77,185 84,035 99,201 105,197 288,433 230,549 34.7% 25.1% Acquisition expenses 18,039 17,753 19,582 22,824 23,815 66,221 54,121 32.0% 22.4% Operating expenses 11,807 12,267 14,950 16,213 15,732 46,895 35,765 33.2% 31.1% Dividends to policyholders 1,469 111 2,036 2,054 2,090 6,180 7,476 42.3% -17.3% -------- -------- -------- -------- -------- -------- -------- ------ ---- Total losses and expenses 109,436 107,316 120,603 140,292 146,834 407,729 327,911 34.2% 24.3% -------- -------- -------- -------- -------- -------- -------- ------ ---- Pre-tax operating income $ 6,714 $ 5,838 $ 8,340 $ 6,838 $ 7,345 $ 22,523 $ 19,508 9.4% 15.5% ======== ======== ======== ======== ======== ======== ======== ========= ====== 18
PMA Capital Corporation Insurance Ratios - PMA Insurance Group 3rd 4th 1st 2nd 3rd Nine Nine Point Chg. Point Chg. Quarter Quarter Quarter Quarter Quarter Months Months 3rd Quarter Nine Months 2002 2002 2003 2003 2003 2003 2002 Better Better (Worse) (Worse) --------------------------------------------------------------------------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 75.7% 76.6% 72.3% 73.8% 74.1% 73.5% 74.5% 1.6 1.0 ------ ------ ------ ------ ------ ------ ------ ------ ------ Expense ratio: Acquisition expenses 17.5% 17.6% 16.8% 17.0% 16.8% 16.9% 17.5% 0.7 0.6 Operating expenses 8.4% 9.2% 10.4% 9.6% 8.9% 9.5% 8.9% (0.5) (0.6) ------ ------ ------ ------ ------ ------ ------ ------ ------ Total expense ratio 25.9% 26.8% 27.2% 26.6% 25.7% 26.4% 26.4% 0.2 -- ------ ------ ------ ------ ------ ------ ------ ------ ------ Policyholders' dividend ratio 1.4% 0.1% 1.8% 1.5% 1.5% 1.6% 2.4% (0.1) 0.8 ------ ------ ------ ------ ------ ------ ------ ------ ------ Combined ratio 103.0% 103.5% 101.3% 101.9% 101.3% 101.5% 103.3% 1.7 1.8 ====== ====== ====== ====== ====== ====== ====== ====== ====== Net investment income ratio -8.7% -8.5% -7.1% -6.1% -5.7% -6.3% -8.7% (3.0) (2.4) ------ ------ ------ ------ ------ ------ ------ ------ ------ Operating ratio 94.3% 95.0% 94.2% 95.8% 95.6% 95.2% 94.6% (1.3) (0.6) ====== ====== ====== ====== ====== ====== ====== ====== ====== 1 The operating expense ratio equals insurance-related operating expenses divided by net premiums earned. Insurance-related operating expenses were $8.7 million, $9.3 million, $12.1 million, $12.9 million and $12.7 million for the third and fourth quarters of 2002 and the first, second and third quarters of 2003, respectively.
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PMA Capital Corporation Statements of Operations - Run-off Operations 1 (Dollar Amounts in Thousands) 3rd 4th 1st 2nd 3rd Nine Nine % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 3rd Nine 2002 2002 2003 2003 2003 2003 2002 Quarter Months ---------------------------------------------------------------------------------------------------- Gross Premiums Written $ 5,517 $ (169) $ 110 $ 195 $ 239 $ 544 $ 105,477 -95.7% -99.5% ========= ========= ========= ========= ========= ========= ========= ====== ====== Net Premiums Written $ (3,418) $ (14,189) $ (1,704) $ (1,124) $ (3,389) $ (6,217) $ 28,752 0.8% NM ========= ========= ========= ========= ========= ========= ========= ====== ====== Revenues: Net premiums earned $ 14,250 $ (1,672) $ 6,846 $ 392 $ (1,617) $ 5,621 $ 31,785 NM -82.3% Net investment income 114 564 361 528 551 1,440 576 NM 150.0% Other revenues -- -- 2,500 -- -- 2,500 -- NM NM --------- --------- --------- --------- --------- --------- --------- ------ ------ Operating revenues 14,364 (1,108) 9,707 920 (1,066) 9,561 32,361 NM -70.5% --------- --------- --------- --------- --------- --------- --------- ------ ------ Losses and Expenses: Losses and loss adjustment expenses 10,038 5,715 5,875 593 (811) 5,657 70,981 NM -92.0% Acquisition expenses 3,672 2,020 865 62 -- 927 8,944 NM -89.6% Operating expenses 656 (8,839) 2,966 268 (258) 2,976 39,933 NM -92.5% --------- --------- --------- --------- --------- --------- --------- ------ ------ Total losses and expenses 14,366 (1,104) 9,706 923 (1,069) 9,560 119,858 NM -92.0% --------- --------- --------- --------- --------- --------- --------- ------ ------ Pre-tax operating income (loss) $ (2) $ (4) $ 1 $ (3) $ 3 $ 1 $ (87,497) NM NM ========= ========= ========= ========= ========= ========= ========= ====== ====== 1 Formerly known as Caliber One.
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PMA Capital Corporation Statements of Operations - Corporate & Other (Dollar Amounts in Thousands) 3rd 4th 1st 2nd 3rd Nine Nine % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 3rd Nine 2002 2002 2003 2003 2003 2003 2002 Quarter Months ------------------------------------------------------------------------------------------------------ Gross Premiums Written $ (220) $ (10,228) $ (256) $ (124) $ (228) $ (608) $ (653) -3.6% 6.9% ======== ======== ======== ======== ====== ======= ======= ==== ==== Net Premiums Written $ (220) $ (228) $ (256) $ (124) $ (228) $ (608) $ (653) -3.6% 6.9% ======== ======== ======== ======== ====== ======= ======= ==== ==== Revenues: Net premiums earned $ (220) $ (228) $ (256) $ (124) $ (228) $ (608) $ (653) -3.6% 6.9% Net investment income (237) 245 582 438 492 1,512 (853) NM NM Other revenues 68 52 69 189 69 327 584 1.5% -44.0% -------- -------- -------- -------- ------ ------- ------- ---- ---- Operating revenues (389) 69 395 503 333 1,231 (922) NM NM -------- -------- -------- -------- ------ ------- ------- ---- ---- Losses and Expenses: Operating expenses 2,303 1,578 3,311 3,842 3,639 10,792 8,651 58.0% 24.7% -------- -------- -------- -------- ------ ------- ------- ---- ---- Total losses and expenses 2,303 1,578 3,311 3,842 3,639 10,792 8,651 58.0% 24.7% -------- -------- -------- -------- ------ ------- ------- ---- ---- Operating loss before income taxes and interest expense (2,692) (1,509) (2,916) (3,339) (3,306) (9,561) (9,573) -22.8% 0.1% Interest expense 519 1,639 1,758 2,225 2,953 6,936 1,618 NM NM -------- -------- -------- -------- ------ ------- ------- ---- ---- Pre-tax operating loss $ (3,211) $ (3,148) $ (4,674) $ (5,564) (6,259) (16,497) (11,191) -94.9% -47.4% ======== ======== ======== ======== ====== ======= ======= ==== ====
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PMA Capital Corporation Operating Cash Flows - Consolidated (In Thousands) 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2002 2002 2003 2003 2003 2003 2002 ---------------------------------------------------------------------------------- Receipts: Premiums and other revenues collected $ 274,892 $ 272,335 $ 274,221 $ 393,639 $ 319,594 $ 987,454 $ 807,967 Investment income received 19,367 24,706 20,108 27,434 20,079 67,621 67,501 --------- --------- --------- --------- --------- --------- --------- Total receipts 294,259 297,041 294,329 421,073 339,673 1,055,075 875,468 --------- --------- --------- --------- --------- --------- --------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 39,288 59,147 6,787 35,305 83,436 125,528 78,980 Losses and LAE paid - prior year 145,222 113,417 210,892 183,345 139,352 533,589 513,894 --------- --------- --------- --------- --------- --------- --------- Total losses and LAE paid 184,510 172,564 217,679 218,650 222,788 659,117 592,874 Insurance operating expenses paid 70,963 67,197 78,957 100,177 64,223 243,357 230,436 Policyholders' dividends paid 3,826 1,868 1,627 1,439 2,880 5,946 7,484 Interest on corporate debt 989 239 2,484 502 3,582 6,568 1,852 --------- --------- --------- --------- --------- --------- --------- Total disbursements 260,288 241,868 300,747 320,768 293,473 914,988 832,646 --------- --------- --------- --------- --------- --------- --------- Net other (13,914) 9,042 (4,358) 3,373 (6,092) (7,077) (34,870) --------- --------- --------- --------- --------- --------- --------- Net operating cash flows $ 20,057 $ 64,215 $ (10,776) $ 103,678 $ 40,108 $ 133,010 $ 7,952 ========= ========= ========= ========= ========= ========= =========
22 PMA Capital Corporation Operating Cash Flows - PMA Re (In Thousands)
3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2002 2002 2003 2003 2003 2003 2002 ---------------------------------------------------------------------------------- Receipts: Premiums collected $ 151,233 $ 144,418 $ 154,610 $ 256,727 $ 170,802 $ 582,139 $ 415,388 Investment income received 8,847 13,740 9,162 16,007 9,107 34,276 35,451 --------- --------- --------- --------- --------- --------- --------- Total receipts 160,080 158,158 163,772 272,734 179,909 616,415 450,839 --------- --------- --------- --------- --------- --------- --------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 14,813 17,895 865 9,701 45,427 55,993 21,304 Losses and LAE paid - prior year 73,100 58,008 115,870 104,331 73,694 293,895 261,322 --------- --------- --------- --------- --------- --------- --------- Total losses and LAE paid 87,913 75,903 116,735 114,032 119,121 349,888 282,626 Insurance operating expenses paid 46,030 40,788 39,418 61,197 40,686 141,301 123,772 --------- --------- --------- --------- --------- --------- --------- Total disbursements 133,943 116,691 156,153 175,229 159,807 491,189 406,398 --------- --------- --------- --------- --------- --------- --------- Net other (3,017) 13,613 660 8,572 1,501 10,733 (26,301) --------- --------- --------- --------- --------- --------- --------- Net operating cash flows $ 23,120 $ 55,080 $ 8,279 $ 106,077 $ 21,603 $ 135,959 $ 18,140 ========= ========= ========= ========= ========= ========= =========
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PMA Capital Corporation Operating Cash Flows - PMA Insurance Group (In Thousands) 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2002 2002 2003 2003 2003 2003 2002 -------------------------------------------------------------------------------- Receipts: Premiums and other revenues collected $ 128,822 $ 129,911 $ 120,589 $ 138,915 $ 150,684 $ 410,188 $ 342,275 Investment income received 9,600 9,859 9,340 9,772 9,523 28,635 28,902 --------- --------- --------- --------- --------- --------- --------- Total receipts 138,422 139,770 129,929 148,687 160,207 438,823 371,177 --------- --------- --------- --------- --------- --------- --------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 20,323 38,742 5,226 24,316 37,387 66,929 48,675 Losses and LAE paid - prior year 60,234 40,901 83,269 60,049 57,474 200,792 209,317 --------- --------- --------- --------- --------- --------- --------- Losses and LAE 80,557 79,643 88,495 84,365 94,861 267,721 257,992 Insurance operating expenses paid 22,970 21,637 37,212 37,214 22,578 97,004 90,849 Policyholders' dividends paid 3,826 1,868 1,627 1,439 2,880 5,946 7,484 --------- --------- --------- --------- --------- --------- --------- Total disbursements 107,353 103,148 127,334 123,018 120,319 370,671 356,325 --------- --------- --------- --------- --------- --------- --------- Net other (6,244) 4,338 (5,052) (1,795) (8,839) (15,686) (5,555) --------- --------- --------- --------- --------- --------- --------- Net operating cash flows $ 24,825 $ 40,960 $ (2,457) $ 23,874 $ 31,049 $ 52,466 $ 9,297 ========= ========= ========= ========= ========= ========= ========= 24
PMA Capital Corporation Operating Cash Flows - Run-off Operations 1 (In Thousands) 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2002 2002 2003 2003 2003 2003 2002 -------------------------------------------------------------------------- Receipts: Net premiums collected (paid) $ (5,163) $ (1,994) $ (978) $ (2,003) $ (1,892) $ (4,873) $ 50,304 Investment income received 920 1,107 1,606 1,655 1,449 4,710 3,148 -------- -------- -------- -------- -------- -------- -------- Total receipts (4,243) (887) 628 (348) (443) (163) 53,452 -------- -------- -------- -------- -------- -------- -------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 4,152 2,510 696 1,288 622 2,606 9,001 Losses and LAE paid - prior year 11,888 14,508 11,753 18,965 8,184 38,902 43,255 -------- -------- -------- -------- -------- -------- -------- Total losses and LAE paid 16,040 17,018 12,449 20,253 8,806 41,508 52,256 Insurance operating expenses paid 1,963 4,772 2,327 1,766 959 5,052 15,815 -------- -------- -------- -------- -------- -------- -------- Total disbursements 18,003 21,790 14,776 22,019 9,765 46,560 68,071 -------- -------- -------- -------- -------- -------- -------- Net other (9,407) 5,784 74 (20) (2,279) (2,225) (11,171) -------- -------- -------- -------- -------- -------- -------- Net operating cash flows $(31,653) $(16,893) $(14,074) $(22,387) $(12,487) $(48,948) $(25,790) ======== ======== ======== ======== ======== ======== ======== 1 Formerly known as Caliber One. 25
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PMA Capital Corporation Statutory Financial Information (Dollars in Thousands) 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2002 2002 2003 2003 2003 1 2003 1 2002 ---------------------------------------------------------------------------------------- PMA Capital Insurance Company: Net premiums written $ 151,262 $ 164,377 $ 147,687 $ 160,985 $ 127,460 $ 436,132 $ 477,103 ========== ========== ========== ========== ========== ========== ========== Statutory Ratios: Loss and LAE ratio 68.7% 100.2% 74.0% 58.3% 153.6% 95.5% 70.6% Underwriting expense ratio 27.4% 22.6% 25.2% 38.1% 29.0% 31.1% 28.2% ---------- ---------- ---------- ---------- ---------- ---------- ---------- Combined ratio 96.1% 122.8% 99.2% 96.4% 182.6% 126.6% 98.8% ========== ========== ========== ========== ========== ========== ========== Operating ratio 93.3% 115.7% 89.2% 86.8% 173.1% 116.9% 95.4% ========== ========== ========== ========== ========== ========== ========== - ---------------------------------------------------------------------------------------------------------------------------- PMA Pool 2: Net premiums written $ 104,516 $ 59,472 $ 175,680 $ 117,183 $ 133,821 $ 426,684 $ 351,478 ========== ========== ========== ========== ========== ========== ========== Statutory Ratios: Loss and LAE ratio 74.6% 77.5% 73.3% 73.6% 74.4% 73.8% 74.7% Underwriting expense ratio 22.4% 39.6% 21.5% 28.5% 24.9% 24.5% 23.4% Policyholders' dividend ratio 2.8% 0.1% 1.6% 1.6% 1.7% 1.6% 2.6% ---------- ---------- ---------- ---------- ---------- ---------- ---------- Combined ratio 99.8% 117.2% 96.4% 103.7% 101.0% 99.9% 100.7% ========== ========== ========== ========== ========== ========== ========== Operating ratio 88.7% 107.1% 83.0% 97.9% 94.9% 91.9% 90.6% ========== ========== ========== ========== ========== ========== ========== 1 Estimated. 2 The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company. 27
PMA Capital Corporation Statutory Net Premiums Written by Product (In Thousands) 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2002 2002 2003 2003 2003 1 2003 1 2002 --------------------------------------------------------------------- PMA Capital Insurance Company: Finite Risk and Financial Products: Property $ 22,995 $ 12,223 $ 19,746 $ 33,063 $ 17,394 $ 70,203 $ 87,448 Casualty 6,437 28,697 19,560 43,688 12,246 75,494 83,345 Other 4,738 4,778 1,806 1,977 2,132 5,915 14,229 -------- -------- -------- -------- -------- -------- -------- Subtotal - Finite Risk and Financial Products 34,170 45,698 41,112 78,728 31,772 151,612 185,022 -------- -------- -------- -------- -------- -------- -------- Treaty Excess of Loss: Property 23,717 23,199 14,864 9,883 15,624 40,371 35,944 Casualty 39,208 33,203 36,674 25,560 39,151 101,385 124,733 Other 1,555 3,021 2,833 5,067 4,003 11,903 2,503 -------- -------- -------- -------- -------- -------- -------- Subtotal - Treaty Excess of Loss 64,480 59,423 54,371 40,510 58,778 153,659 163,180 -------- -------- -------- -------- -------- -------- -------- Treaty Pro-Rata: Property 10,853 21,259 6,203 7,957 5,871 20,031 30,995 Casualty 37,026 34,637 39,378 27,319 23,545 90,242 82,390 Other 138 83 97 67 92 256 116 -------- -------- -------- -------- -------- -------- -------- Subtotal - Treaty Pro-Rata 48,017 55,979 45,678 35,343 29,508 110,529 113,501 -------- -------- -------- -------- -------- -------- -------- Facultative: Property 2,472 986 1,365 1,381 3,145 5,891 5,657 Casualty 2,123 2,291 5,161 5,023 4,257 14,441 9,743 -------- -------- -------- -------- -------- -------- -------- Subtotal - Facultative 4,595 3,277 6,526 6,404 7,402 20,332 15,400 -------- -------- -------- -------- -------- -------- -------- Total - PMA Capital Insurance Company $151,262 $164,377 $147,687 $160,985 $127,460 $436,132 $477,103 ======== ======== ======== ======== ======== ======== ======== - ----------------------------------------------------------------------------------------------------------------------- PMA Pool 2: Workers Compensation & Integrated Disability $ 95,943 $ 44,594 $147,425 $ 91,269 $116,397 $355,091 $293,351 Other Commercial Lines 8,573 14,878 28,255 25,914 17,424 71,593 58,127 -------- -------- -------- -------- -------- -------- -------- Total - PMA Pool $104,516 $ 59,472 $175,680 $117,183 $133,821 $426,684 $351,478 ======== ======== ======== ======== ======== ======== ======== 1 Estimated. 2 The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company. 28
PMA Capital Corporation Statutory Surplus (In Thousands) 3rd 4th 1st 2nd 3rd Quarter Quarter Quarter Quarter Quarter 2002 2002 2003 2003 2003 1 ----------------------------------------------------------------- PMA Capital Insurance Company $ 518,604 $ 580,151 $ 554,611 $ 581,821 $ 477,391 PMA Pool 2 255,572 305,533 302,646 304,109 301,684 Caliber One Indemnity Company 26,735 26,844 -- -- -- Eliminations 3 (282,307) (332,377) (302,646) (304,109) (301,684) --------- --------- --------- --------- --------- Total $ 518,604 $ 580,151 $ 554,611 $ 581,821 $ 477,391 ========= ========= ========= ========= ========= 1 Estimated. 2 The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company. 3 Surplus for PMA Pool and Caliber One Indemnity Company is eliminated as it is included in the statutory surplus of PMA Capital Insurance Company. 29
PMA Capital Corporation Industry Ratings and Market Information Transfer Agent and Registrar: Securities Listing: Certificate Transfers and Conversions: The Corporation's Class A Common Stock is listed The Bank of New York on the NASDAQ Stock Market?. It trades under Receive and Deliver Department - 11 W the stock symbol: PMACA. P.O. Box 11002 Church Street Station Inquiries: New York, NY 10286 William E. Hitselberger Chief Financial Officer Written Inquiries: 215.665.5070 The Bank of New York e-mail: bhitselberger@pmacapital.com Shareholder Relations Department - 11 E P.O. Box 11258 Investor Relations Church Street Station 215.665.5046 New York, NY 10286 investorrelations@pmacapital.com Phone Inquiries: Company Website: 800.524.4458 http://www.pmacapital.com Email Inquiries: shareowner-svcs@bankofny.com - -----------------------------------------------------------------------------------------------------------------
Financial Strength Ratings (as of 11/6/2003):
A.M. Best S&P Moody's ---------------- ----------------- ----------------- PMA Capital Insurance Company B++ (5th of 16) BBB- (10th of 21) Ba1 (11th of 21) PMA Pool 1 B++ (5th of 16) BBB (9th of 21) Baa2 (9th of 21) 1 The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company.
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