-----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, BiqNJihF6NtMJtz7rvN6jemHG9UALqytrP9h0yvLmcSfwlt00xp71vVgOh1vCX+3 BNouI3bGaJkZnGBEITqung== 0000950159-04-000132.txt : 20040211 0000950159-04-000132.hdr.sgml : 20040211 20040211165006 ACCESSION NUMBER: 0000950159-04-000132 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040211 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040211 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: 04586931 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 pma8k2-11.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): February 11, 2004 ----------------- 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 7. Financial Statements and Exhibits --------------------------------- (c) Exhibits. The Exhibit Index on page E-1 is incorporated herein -------- by reference. Item 12. Disclosure of Results of Operations and Financial Condition ----------------------------------------------------------- On February 11, 2004, the registrant issued a news release regarding, its Fourth Quarter 2003 results, a copy of which is furnished as Exhibit 99.1 hereto and is incorporated herein by reference, and the Company's Fourth Quarter 2003 Statistical Supplement is furnished as Exhibit 99.2 and is 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: February 11, 2004 By: /s/ William E. Hitselberger ------------------------------ William E. Hitselberger Senior Vice President, Chief Financial Officer and Treasurer 3 Index to Exhibits Number Description Method of Furnishing ------ ----------- -------------------- 99.1 PMA Capital Corporation Furnished herewith. news release dated February 11, 2004 99.2 Fourth Quarter 2003 Furnished herewith. Statistical Supplement 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 Fourth Quarter 2003 Results, Completion of Reserve Review and Election of Chief Executive Officer

Philadelphia, PA, February 11, 2004 — PMA Capital (NASDAQ: PMACA) today announced a net loss of $20.0 million, or 64 cents per share, for the fourth quarter of 2003, compared with a net loss of $10.4 million, or 33 cents per share, for the fourth quarter of 2002. Included in results for the fourth quarter of 2003 is a non-cash charge of $25 million, or 80 cents per share, to increase the valuation allowance for our deferred tax asset, and an after-tax charge of $3.7 million, or 12 cents per share, as a result of our decision to exit the reinsurance business, mainly for termination benefits. For full year 2003, we recorded a net loss of $93.6 million, or $2.99 per share, compared to $48.0 million, or $1.53 per share, for 2002. The Company also announced that its Board of Directors has elected Vincent T. Donnelly as President and Chief Executive Officer.

During the fourth quarter of 2003, both internal and, as previously announced, external reserve studies for The PMA Insurance Group were completed. In connection with the completion of these reviews, the fourth quarter of 2003 includes a net charge of $4.6 million ($7.0 million pre-tax), or 15 cents per share, due to lower underwriting results at The PMA Insurance Group for workers’ compensation business written for accident years 2001 and 2002. In addition, during the fourth quarter, we updated our previously completed comprehensive study of PMA Re’s loss reserves and have concluded that no additions to PMA Re’s loss reserves for prior years were required during the fourth quarter.

Results for full year 2003 include the third quarter after-tax charge of $97.5 million, or $3.11 per share, to increase PMA Re’s loss reserves. That charge reflected adverse prior year loss development, primarily from casualty business written in accident years 1997 through 2000. In addition, the total valuation allowance on the deferred tax asset of $49 million recorded in 2003 impacted results by $1.56 per share for the full year.

Mr. Donnelly commented, “The results of these reviews have reaffirmed our confidence in the adequacy of our loss reserves for all of our insurance operations at December 31, 2003, and we believe that our future results will not be affected by further prior year reserve strengthening. We believe the actions we have taken put this issue of reserve development behind us.”

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Mr. Donnelly continued, “At The PMA Insurance Group, we are focused on continuing to deliver outstanding service to our customers and producers and appreciate the numerous customers, agents and brokers who have stood by us. The capital position of The PMA Insurance Group remains strong and continues to provide the financial strength and security we have delivered to the market over many years. Premium production during the fourth quarter and January 2004 was in line with our expectations. I want to reaffirm that our main objective is to restore the “A–” (Excellent) A.M. Best financial strength rating of The PMA Insurance Group. The run-off of our reinsurance business is continuing in an efficient manner, and we will evaluate opportunities to employ the excess capital to be generated as the run-off continues. We are confident that we have the financial strength, commitment and expertise to succeed in 2004 and beyond.”

Financial Condition

Total assets were $4.2 billion as of December 31, 2003, compared to $4.1 billion as of December 31, 2002. Shareholders’ equity was $463.7 million as of December 31, 2003, compared with $503.8 million as of September 30, 2003 and $581.4 million as of December 31, 2002. The statutory surplus of PMA Capital Insurance Company (“PMACIC”), PMA Capital Corporation’s directly held reinsurance subsidiary, increased to $500.6 million at December 31, 2003, compared to $477.4 million at September 30, 2003. The statutory surplus of PMACIC includes $296.8 million at December 31, 2003 and $301.7 million at September 30, 2003 from its insurance subsidiaries comprising The PMA Insurance Group. Unassigned surplus at PMACIC grew by $23.2 million from September 30, 2003, to $17.0 million at December 31, 2003. At December 31, 2003, we had $15.0 million in cash and short-term investments at the holding company.

Book value per share was $14.80 as of December 31, 2003, compared with $16.08 as of September 30, 2003 and $18.56 as of December 31, 2002. Net unrealized gains on fixed maturities decreased to $31.4 million after-tax, or $1.00 per share, as of December 31, 2003, compared to $37.8 million, or $1.21 per share, at September 30, 2003, and $33.3 million, or $1.06 per share, at year-end 2002. As a result of lower current interest rates, we have recorded a minimum pension liability at December 31, 2003, which reduced GAAP book value by $15.6 million, or 50 cents per share, but had no impact on earnings or statutory capital.

As of December 31, 2003, total outstanding debt was $187.6 million, compared to $151.3 million at December 31, 2002. The components of our debt as of December 31, 2003 were as follows:

(dollar amounts in thousands) Amount
Outstanding		 Maturity
4.25% convertible debt     $ 86,250   2022 1
Trust preferred debt 2    43,816   2033 
8.50% senior notes    57,500   2018 
Total long-term debt   $ 187,566  
 
(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. This debt may be converted at any time, at the holder’s option, at a current price of $16.368 per share.

(2)  

The increase of $1.3 million in trust preferred debt at December 31, 2003, compared to September 30, 2003, is due to the application of the provisions of FASB Interpretation No. 46 (“FIN 46”),“Consolidation of Variable Interest Entities.” Application of the provisions of FIN 46 required us to deconsolidate our wholly owned statutory trust subsidiaries, which resulted in an increase of $1.3 million of other assets and debt on our balance sheet.


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Revenues

Revenues for the fourth quarter of 2003 and 2002 were $369.4 million and $292.6 million, respectively. For full year 2003, revenues were $1,301.2 million, compared to $1,075.1 million for 2002. The 26% and 21% increases in revenues for the quarter and full year periods primarily reflect higher net premiums earned. Additionally, for full year 2003, pre-tax net realized investment gains were $13.8 million, compared to pre-tax net realized investment losses of $16.1 million for 2002.

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
December 31,		 Year ended
December 31,
(Dollars in thousands) 2003 2002 2003 2002
 
Pre-tax operating income (loss):                    
   The PMA Insurance Group   $ (982 ) $ 5,838   $ 21,541   $ 25,346  
   PMA Re (1)    12,556    (28,480 )  (79,433 )  13,422  
   Corporate & Other    (6,319 )  (3,148 )  (22,816 )  (14,339 )
   Run-off Operations (2)    (819 )  (4 )  (818 )  (87,501 )
Net realized investment gains (losses)    3,582    3,943    13,780    (16,085 )
Pre-tax income (loss)    8,018    (21,851 )  (67,746 )  (79,157 )
Income tax expense (benefit)    28,050    (11,448 )  25,823    (31,133 )
Net loss   $ (20,032 ) $ (10,403 ) $ (93,569 ) $ (48,024 )
(1)  

On November 6, 2003, we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. Accordingly, current results will not be indicative of future results.

(2)  

Formerly known as the Caliber One operating segment.


The PMA Insurance Group

The PMA Insurance Group reported a pre-tax operating loss of $982,000 for the fourth quarter of 2003 and pre-tax operating income of $21.5 million for the full year, compared to pre-tax operating income of $5.8 million and $25.3 million for the same periods in 2002. Results for the fourth quarter and full year 2003 reflect a pre-tax net charge of $7.0 million due to lower underwriting results from accident years 2001 and 2002 and lower net investment income, partially offset by improved current accident year underwriting results. The $7.0 million charge, which resulted from the completion of our fourth quarter actuarial study, is comprised of an increase in loss reserves of $50 million, primarily from loss–sensitive and participating workers’ compensation lines of business, offset by an increase in retrospectively-rated premiums of $35 million and a reduction in policyholder dividends of $8 million.

Net premiums written increased to $140.8 million for the fourth quarter of 2003 and $603.6 million for the full year, compared with $73.5 million and $452.3 million for the same periods in 2002. Net

3

premiums written for 2003 include the retrospectively rated premiums described above. Under retrospectively rated policies, the premium is adjusted after the policy period expires based upon the insured’s actual losses incurred during the policy period. Additionally, the growth in premiums reflects an increase in the volume of risks underwritten and improved pricing in all lines of insurance business underwritten by The PMA Insurance Group.

The combined ratio on a GAAP basis in 2003 was 105.6% for the fourth quarter and 102.8% for the full year, compared to 103.5% and 103.2% for the same periods in 2002. The combined ratios for the fourth quarter and full year 2003 include approximately 4 points and 1 point due to the higher than expected losses and LAE from prior accident years.

Net investment income was $8.3 million and $32.9 million for the fourth quarter and full year 2003, compared to $8.6 million and $35.6 million for the same 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 withdrawn from the reinsurance business. PMA Re reported pre-tax operating income of $12.6 million for the fourth quarter of 2003, compared to a pre-tax operating loss of $28.5 million for the same period last year. Included in results for the fourth quarter of 2003 are exit costs of $2.6 million, mainly employee termination benefits.

For full year 2003, PMA Re reported a pre-tax operating loss of $79.4 million, compared to pre-tax operating income of $13.4 million for 2002. PMA Re’s full year 2003 results reflect the $150 million ($97.5 million after-tax) third quarter reserve charge associated mainly with accident years 1997 to 2000.

Net premiums written were $124.3 million for the fourth quarter and $595.1 million for full year 2003, compared with $185.9 million and $639.0 million for the same periods last year. The combined ratio on a GAAP basis was 97.0% for the fourth quarter of 2003 and 117.9% for the full year, compared to 124.3% and 106.4% for the same periods in 2002.

Net investment income was $7.5 million and $32.5 million for the fourth quarter and full year 2003, compared with $11.6 million and $48.7 million for the same periods last year. The declines in net investment income are due to lower interest earned on funds held assets and lower yields on a higher invested asset base.

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 $22.8 million for the fourth quarter and full year 2003, respectively, compared to pre-tax operating losses of $3.1 million and $14.3 million for the same periods last year. Interest expense for the fourth quarter and full year 2003 increased by $1.3 million and $6.6 million over the comparable periods last year, primarily due to a higher average amount of debt outstanding in 2003, compared with 2002. Additionally, results for the fourth quarter and full year 2003 include approximately $3 million of costs associated primarily with salary obligations under employment contracts with our former executive officers.

4

Run-off Operations

In May 2002, we announced our decision to withdraw from the excess and surplus lines marketplace which comprises our Run-off Operations. The Run-off Operations recorded a pre-tax operating loss of $819,000 for the fourth quarter of 2003 and $818,000 for the full year.

The Run-off Operations were essentially breakeven for the fourth quarter of 2002. For full year 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 and a $43 million charge to exit from and run-off this business. Our internal and the external actuaries performed a review of the loss reserves at the Run-off Operations and have concluded that no adjustment to the carried loss reserves at December 31, 2003 was necessary.

Conference Call with Investors

As a reminder, we will hold a conference call with investors beginning at 8:30 a.m. Eastern Time on Thursday, February 12th to review our 2003 results. 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
888-806-9459 (Domestic) 888-266-2081 (Domestic)
703-871-3093 (International) 703-925-2533 (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 370239. The replay will be available from approximately 11:30 a.m. Eastern Time on Thursday, February 12th until 11:59 p.m. Eastern Time on Thursday, February 19th.

Quarterly Statistical Supplement

Our Fourth 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.

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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:

•

our ability to effect an efficient withdrawal from the reinsurance business, including the commutation of reinsurance business with certain large ceding companies;

•

regulatory or tax 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 or any other state insurance department;

•

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

•

the effect on The PMA Insurance Group’s premium writings, profitability and ratings due to its status as a subsidiary of PMA Capital Insurance Company;

•

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;

•

the outcome of any litigation against the Company, including the outcome of the purported class action lawsuits;
•

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

•

the impact of future results on the recoverability of our deferred tax asset;

•

adequacy and collectibility of reinsurance that we purchased;

•

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 and 10-Q 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) December 31,
2003		 December 31,
2002
Assets:            
Investments and cash:  
      Fixed maturities available for sale   $ 1,854,555   $ 1,529,924  
      Short-term investments    151,332    298,686  
      Short-term investments, loaned securities collateral    6,300    --  
      Cash    28,963    43,853  
      Total investments and cash    2,041,150    1,872,463  
 
Accrued investment income    20,870    18,600  
Premiums receivable    364,125    363,675  
Reinsurance receivables    1,220,320    1,295,083  
Deferred income taxes    76,962    94,074  
Deferred acquisition costs    83,975    89,222  
Funds held by reinsureds    124,695    157,479  
Other assets    255,861    215,198  
      Total assets   $ 4,187,958   $ 4,105,794  
Liabilities:  
Unpaid losses and loss adjustment expenses   $ 2,541,318   $ 2,449,890  
Unearned premiums    403,708    405,379  
Debt    187,566    151,250  
Accounts payable, accrued expenses  
      and other liabilities    314,830    253,175  
Funds held under reinsurance treaties    262,105    249,670  
Dividends to policyholders    8,479    14,998  
Payable under securities loan agreements    6,285    42  
      Total liabilities    3,724,291    3,524,404  
Shareholders' Equity:  
Class A Common stock    171,090    171,090  
Additional paid-in capital    109,331    109,331  
Retained earnings    216,115    319,014  
Accumulated other comprehensive income    19,622    34,552  
Notes receivable from officers    (65 )  (62 )
Treasury stock, at cost    (52,426 )  (52,535 )
      Total shareholders' equity    463,667    581,390  
      Total liabilities and shareholders' equity   $ 4,187,958   $ 4,105,794  
Shareholders' equity per share   $ 14.80   $ 18.56  

7



PMA Capital Corporation
GAAP Consolidated Statements of Operations
(Unaudited)

Three months ended December 31,
(Dollars in thousands, except per share data) 2003 2002
 
Gross premiums written     $ 295,671   $ 283,303  
 
Net premiums written   $ 265,457   $ 245,002  
 
Revenues:  
Net premiums earned   $ 344,991   $ 263,806  
Net investment income    16,331    21,008  
Net realized investment gains    3,582    3,943  
Other revenues    4,466    3,859  
      Total revenues    369,370    292,616  
 
Expenses:  
Losses and loss adjustment expenses    266,899    250,698  
Acquisition expenses    64,790    55,782  
Operating expenses    32,251    6,237  
Dividends to policyholders    (5,539 )  111  
Interest expense    2,951    1,639  
      Total losses and expenses    361,352    314,467  
Pre-tax income (loss)    8,018    (21,851 )
 
Income tax expense (benefit):  
      Current    --    (3,606 )
      Deferred    28,050    (7,842 )
Total income tax expense (benefit)    28,050    (11,448 )
Net loss   $ (20,032 ) $ (10,403 )
 
Net loss per share:  
Basic   $ (0.64 ) $ (0.33 )
Diluted   $ (0.64 ) $ (0.33 )

8



PMA Capital Corporation
GAAP Consolidated Statements of Operations
(Unaudited)

Year ended December 31,
(Dollars in thousands, except per share data) 2003 2002
 
Gross premiums written     $ 1,429,644   $ 1,386,546  
 
Net premiums written   $ 1,192,254   $ 1,104,997  
 
Revenues:  
Net premiums earned   $ 1,198,165   $ 991,011  
Net investment income    68,923    84,881  
Net realized investment gains (losses)    13,780    (16,085 )
Other revenues    20,379    15,330  
      Total revenues    1,301,247    1,075,137  
 
Expenses:  
Losses and loss adjustment expenses    998,347    823,658  
Acquisition expenses    256,446    216,984  
Operating expenses    103,672    102,808  
Dividends to policyholders    641    7,587  
Interest expense    9,887    3,257  
      Total losses and expenses    1,368,993    1,154,294  
Pre-tax loss    (67,746 )  (79,157 )
 
Income tax expense (benefit):  
      Current    --    (3,606 )
      Deferred    25,823    (27,527 )
Total income tax expense (benefit)    25,823    (31,133 )
Net loss   $ (93,569 ) $ (48,024 )
 
Net loss per share:  
Basic   $ (2.99 ) $ (1.53 )
Diluted   $ (2.99 ) $ (1.53 )

9



PMA Capital Corporation
Selected Financial Data
(Unaudited)

Three months ended December 31,
(Dollars in thousands) 2003 2002
Net premiums written:            
       The PMA Insurance Group   $ 140,784   $ 73,549  
       PMA Re (1)    124,261    185,870  
       Run-off Operations (2)    592    (14,189 )
       Corporate and Other    (180 )  (228 )
Consolidated   $ 265,457   $ 245,002  
Revenues:  
Net premiums earned:  
       The PMA Insurance Group   $ 177,474   $ 100,736  
       PMA Re (1)    168,646    164,970  
       Run-off Operations (2)    (949 )  (1,672 )
       Corporate and Other    (180 )  (228 )
Consolidated net premiums earned    344,991    263,806  
Net investment income    16,331    21,008  
Realized gains    3,582    3,943  
Other revenues    4,466    3,859  
Consolidated revenues   $ 369,370   $ 292,616  
Components of net loss:  
Pre-tax operating income (loss) (3):  
       The PMA Insurance Group   $ (982 ) $ 5,838  
       PMA Re (1)    12,556    (28,480 )
       Run-off Operations (2)    (819 )  (4 )
       Corporate and Other    (6,319 )  (3,148 )
Realized gains    3,582    3,943  
Pre-tax income (loss)    8,018    (21,851 )
Income tax expense (benefit)    28,050    (11,448 )
Net loss   $ (20,032 ) $ (10,403 )
Weighted average common shares outstanding:  
       Basic    31,333,881    31,328,922  
       Diluted    31,333,881    31,328,922  
 
(1)  

On November 6, 2003, we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. Accordingly, results for the fourth quarter will not be indicative of future results.

(2)  

Formerly known as the Caliber One operating segment.

(3)  

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 an 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)

Year ended December 31,
(Dollars in thousands) 2003 2002
Net premiums written:            
       The PMA Insurance Group   $ 603,593   $ 452,276  
       PMA Re (1)    595,074    639,039  
       Run-off Operations (2)    (5,625 )  14,563  
       Corporate and Other    (788 )  (881 )
Consolidated   $ 1,192,254   $ 1,104,997  
 
Revenues:  
Net premiums earned:  
       The PMA Insurance Group   $ 570,032   $ 410,266  
       PMA Re (1)    624,249    551,513  
       Run-off Operations (2)    4,672    30,113  
       Corporate and Other    (788 )  (881 )
Consolidated net premiums earned    1,198,165    991,011  
Net investment income    68,923    84,881  
Realized gains (losses)    13,780    (16,085 )
Other revenues    20,379    15,330  
Consolidated revenues   $ 1,301,247   $ 1,075,137  
 
Components of net loss:  
Pre-tax operating income (loss) (3):  
       The PMA Insurance Group   $ 21,541   $ 25,346  
       PMA Re (1)    (79,433 )  13,422  
       Run-off Operations (2)    (818 )  (87,501 )
       Corporate and Other    (22,816 )  (14,339 )
Realized gains (losses)    13,780    (16,085 )
Pre-tax loss    (67,746 )  (79,157 )
Income tax expense (benefit)    25,823    (31,133 )
Net loss   $ (93,569 ) $ (48,024 )
 
Weighted average common shares outstanding:  
       Basic    31,330,183    31,284,848  
       Diluted    31,330,183    31,284,848  
(1)  

On November 6, 2003, we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. Accordingly, results for 2003 will not be indicative of future results.

(2)  

Formerly known as the Caliber One operating segment.

(3)  

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 an 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 Fourth Quarter - 2003 - --------------------------------------------------------------------------------------------------------------------------- Table of Contents ----------------- Page Consolidated Highlights: Selected Financial Data 1 Selected Financial Data - Full Year 2 Consolidated Statements of Operations - Per Share Data 3 Consolidated Statements of Operations 4 Consolidated Statements of Operations - Full Year 5 Consolidated Balance Sheets 6 Invested Assets and Net Investment Income, Debt, Other Assets and Liabilities 7 Segment Information: Statements of Operations - Consolidating - Full Year 8 - 9 Insurance Ratios - Consolidating - Full Year 10 - 11 Statements of Operations - Consolidating - Fourth Quarter 12 - 13 Insurance Ratios - Consolidating - Fourth Quarter 14 - 15 Statements of Operations - PMA Insurance Group 16 Insurance Ratios - PMA Insurance Group 17 Statements of Operations - PMA Re 18 Insurance Ratios - PMA Re 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 Insurance Group 23 Operating Cash Flows - PMA Re 24 Operating Cash Flows - Run-off Operations 25 Statutory Financial Information: Statutory Surplus and Statutory Financial Information 27 Other Information: Industry Ratings and Market Information 28 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) 4th 1st 2nd 3rd 4th % Change Quarter Quarter Quarter Quarter Quarter 4th 2002 2003 2003 2003 2003 Quarter ----------------------------------------------------------------------------- Net Premiums Written by Segment: PMA Insurance Group $ 73,549 $ 194,239 $ 119,440 $ 149,130 $ 140,784 91.4% PMA Re 1 185,870 158,579 172,464 139,770 124,261 -33.1% Run-off Operations 2 (14,189) (1,704) (1,124) (3,389) 592 NM Corporate & Other (228) (256) (124) (228) (180) 21.1% --------- --------- --------- --------- --------- ------ Net premiums written $ 245,002 $ 350,858 $ 290,656 $ 285,283 $ 265,457 8.3% ========= ========= ========= ========= ========= ====== Major Components of Net Income (Loss): Pre-tax operating income (loss) by segment: PMA Insurance Group $ 5,838 $ 8,340 $ 6,838 $ 7,345 $ (982) NM PMA Re 1 (28,480) 8,577 13,107 (113,673) 12,556 NM Run-off Operations 2 (4) 1 (3) 3 (819) NM Corporate & Other (3,148) (4,674) (5,564) (6,259) (6,319) NM --------- --------- --------- --------- --------- ------ Pre-tax operating income (loss) (25,794) 12,244 14,378 (112,584) 4,436 NM Net realized investment gains 3,943 4,355 4,451 1,392 3,582 -9.2% --------- --------- --------- --------- --------- ------ Pre-tax income (loss) (21,851) 16,599 18,829 (111,192) 8,018 NM Income tax expense (benefit) (11,448) 5,897 6,662 (14,786) 28,050 NM --------- --------- --------- --------- --------- ------ Net income (loss) $ (10,403) $ 10,702 $ 12,167 $ (96,406) $ (20,032) -92.6% ========= ========= ========= ========= ========= ====== After-tax operating income (loss) $ (12,966) $ 7,871 $ 9,274 $ (97,311) $ (22,360) -72.5% ========= ========= ========= ========= ========= ====== Diluted Earnings (Loss) Per Share: Net income (loss) $ (0.33) $ 0.34 $ 0.39 $ (3.08) $ (0.64) -93.9% Less the impact of: Realized gains after tax 0.08 0.09 0.09 0.03 0.07 -12.5% --------- --------- --------- --------- --------- ------ After-tax operating income (loss) $ (0.41) $ 0.25 $ 0.30 $ (3.11) $ (0.71) -73.2% ========= ========= ========= ========= ========= ====== Capitalization: Debt $ 151,250 $ 131,250 $ 176,250 $ 186,250 $ 187,566 24.0% Shareholders' equity excluding FAS 115 unrealized gain 548,128 555,198 565,081 465,943 432,284 -21.1% --------- --------- --------- --------- --------- ------ Total capitalization excluding FAS 115 unrealized gain 699,378 686,448 741,331 652,193 619,850 -11.3% FAS 115 unrealized gain 33,262 33,170 52,666 37,830 31,383 -5.6% --------- --------- --------- --------- --------- ------ Total capitalization including FAS 115 unrealized gain $ 732,640 $ 719,618 $ 793,997 $ 690,023 $ 651,233 -11.1% ========= ========= ========= ========= ========= ====== Book Value Per Share: Excluding FAS 115 unrealized gain $ 17.50 $ 17.72 $ 18.04 $ 14.87 $ 13.80 -21.1% Including FAS 115 unrealized gain $ 18.56 $ 18.78 $ 19.72 $ 16.08 $ 14.80 -20.3% Debt to Total Capital: Excluding FAS 115 unrealized gain 21.6% 19.1% 23.8% 28.6% 30.2% 39.8% Including FAS 115 unrealized gain 20.6% 18.2% 22.2% 27.0% 28.8% 39.8% Interest Coverage: Income before interest and income taxes to interest expense NM 10.44 9.46 NM NM NM Operating income before interest and income taxes to interest expense NM 7.96 7.46 NM NM NM 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. 2 Formerly known as Caliber One.
1
PMA Capital Corporation Selected Financial Data (Dollar Amounts in Thousands, Except Per Share Data) Twelve Twelve % Change Months Months Twelve 2003 2002 Months ------------------------------------- Net Premiums Written by Segment: PMA Insurance Group $ 603,593 $ 452,276 33.5% PMA Re 1 595,074 639,039 -6.9% Run-off Operations 2 (5,625) 14,563 NM Corporate & Other (788) (881) 10.6% ----------- ----------- ------ Net premiums written $ 1,192,254 $ 1,104,997 7.9% =========== =========== ====== Major Components of Net Income (Loss): Pre-tax operating income (loss) by segment: PMA Insurance Group $ 21,541 $ 25,346 -15.0% PMA Re 1 (79,433) 13,422 NM Run-off Operations 2 (818) (87,501) 99.1% Corporate & Other (22,816) (14,339) -59.1% ----------- ----------- ------ Pre-tax operating loss (81,526) (63,072) -29.3% Net realized investment gains (losses) 13,780 (16,085) NM ----------- ----------- ------ Pre-tax loss (67,746) (79,157) 14.4% Income tax expense (benefit) 25,823 (31,133) NM ----------- ----------- ------ Net loss $ (93,569) $ (48,024) -94.8% =========== =========== ====== After-tax operating loss $ (102,526) $ (37,569) NM =========== =========== ====== Diluted Earnings (Loss) Per Share: Net loss $ (2.99) $ (1.53) -95.4% Less the impact of: Realized gains (losses) after tax 0.28 (0.33) NM ----------- ----------- ------ After-tax operating loss $ (3.27) $ (1.20) NM =========== =========== ====== 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. 2 Formerly known as Caliber One.
2
PMA Capital Corporation Consolidated Statements of Operations - Per Share Data 4th 1st 2nd 3rd 4th Twelve Twelve Quarter Quarter Quarter Quarter Quarter Months Months 2002 2003 2003 2003 2003 2003 2002 ---------------------------------------------------------------------------------------------- Diluted Earnings (Loss) Per Share: Net income (loss) $ (0.33) $ 0.34 $ 0.39 $ (3.08) $ (0.64) $ (2.99) $ (1.53) ============ ============ ============ ============ ============= =========== ============ Pre-tax operating income (loss) $ (0.82) $ 0.39 $ 0.46 $ (3.59) $ 0.14 $ (2.60) $ (2.02) ============ ============ ============ ============ ============= =========== ============ After-tax operating income (loss) $ (0.41) $ 0.25 $ 0.30 $ (3.11) $ (0.71) $ (3.27) $ (1.20) ============ ============ ============ ============ ============= =========== ============ Diluted weighted average common shares outstanding 31,328,922 31,328,922 31,331,197 31,328,965 31,333,881 31,330,183 31,284,848 ============ ============ ============ ============ ============= =========== ============ -------------------------------------------------------------------------------------------- Dividends declared: Class A Common stock $ 0.105 $ 0.105 $ 0.105 $ 0.105 $ - $ 0.315 $ 0.42 Actual common shares issued and outstanding 31,328,922 31,328,922 31,328,922 31,329,063 31,334,403 31,334,403 31,328,922 ============ ============ ============ ============ ============= =========== ============ - ------------------------------------------------------------------------------------------------------------------------------------ Class A Common Stock prices: High $ 15.30 $ 15.00 $ 12.30 $ 12.85 $ 14.17 $ 15.00 $ 25.99 Low $ 12.37 $ 6.67 $ 6.44 $ 11.71 $ 3.97 $ 3.97 $ 12.37 Close $ 14.33 $ 6.77 $ 12.12 $ 12.53 $ 5.12 $ 5.12 $ 14.33
3
PMA Capital Corporation Consolidated Statements of Operations (In Thousands) 4th 1st 2nd 3rd 4th % Change Quarter Quarter Quarter Quarter Quarter 4th 2002 2003 2003 2003 2003 Quarter ---------------------------------------------------------------------- Gross Premiums Written $ 283,303 $ 419,694 $ 361,899 $ 352,380 $ 295,671 4.4% ========= ========= ========= ========= ========= ====== Net Premiums Written $ 245,002 $ 350,858 $ 290,656 $ 285,283 $ 265,457 8.3% ========= ========= ========= ========= ========= ====== Revenues: Net premiums earned $ 263,806 $ 274,070 $ 285,622 $ 293,482 $ 344,991 30.8% Net investment income 21,008 17,645 17,780 17,167 16,331 -22.3% Net realized investment gains 3,943 4,355 4,451 1,392 3,582 -9.2% Other revenues 3,859 7,000 4,766 4,147 4,466 15.7% --------- --------- --------- --------- --------- ------ Total revenues 292,616 303,070 312,619 316,188 369,370 26.2% --------- --------- --------- --------- --------- ------ Expenses: Losses and loss adjustment expenses 250,698 202,585 193,074 335,789 266,899 6.5% Acquisition expenses 55,782 56,220 72,215 63,221 64,790 16.1% Operating expenses 6,237 23,872 24,222 23,327 32,251 NM Dividends to policyholders 111 2,036 2,054 2,090 (5,539) NM Interest expense 1,639 1,758 2,225 2,953 2,951 80.0% --------- --------- --------- --------- --------- ------ Total losses and expenses 314,467 286,471 293,790 427,380 361,352 14.9% --------- --------- --------- --------- --------- ------ Pre-tax income (loss) (21,851) 16,599 18,829 (111,192) 8,018 NM --------- --------- --------- --------- --------- ------ Income tax expense (benefit): Current (3,606) -- 221 (221) -- NM Deferred (7,842) 5,897 6,441 (14,565) 28,050 NM --------- --------- --------- --------- --------- ------ Total income tax expense (benefit) (11,448) 5,897 6,662 (14,786) 28,050 NM --------- --------- --------- --------- --------- ------ Net income (loss) $ (10,403) $ 10,702 $ 12,167 $ (96,406) $ (20,032) -92.6% ========= ========= ========= ========= ========= ====== Pre-tax operating income (loss) $ (25,794) $ 12,244 $ 14,378 $(112,584) $ 4,436 NM ========= ========= ========= ========= ========= ====== After-tax operating income (loss) $ (12,966) $ 7,871 $ 9,274 $ (97,311) $ (22,360) -72.5% ========= ========= ========= ========= ========= ======
4
PMA Capital Corporation Consolidated Statements of Operations (In Thousands) Twelve Twelve % Change Months Months Twelve 2003 2002 Months ---------------------------------------------- Gross Premiums Written $ 1,429,644 $ 1,386,546 3.1% =========== =========== =========== Net Premiums Written $ 1,192,254 $ 1,104,997 7.9% =========== =========== =========== Revenues: Net premiums earned $ 1,198,165 $ 991,011 20.9% Net investment income 68,923 84,881 -18.8% Net realized investment gains (losses) 13,780 (16,085) NM Other revenues 20,379 15,330 32.9% ----------- ----------- ----------- Total revenues 1,301,247 1,075,137 21.0% ----------- ----------- ----------- Expenses: Losses and loss adjustment expenses 998,347 823,658 21.2% Acquisition expenses 256,446 216,984 18.2% Operating expenses 103,672 102,808 0.8% Dividends to policyholders 641 7,587 -91.6% Interest expense 9,887 3,257 203.6% ----------- ----------- ----------- Total losses and expenses 1,368,993 1,154,294 18.6% ----------- ----------- ----------- Pre-tax loss (67,746) (79,157) 14.4% ----------- ----------- ----------- Income tax expense (benefit): Current -- (3,606) 100.0% Deferred 25,823 (27,527) NM ----------- ----------- ----------- Total income tax expense (benefit) 25,823 (31,133) NM ----------- ----------- ----------- Net loss $ (93,569) $ (48,024) -94.8% =========== =========== =========== Pre-tax operating loss $ (81,526) $ (63,072) -29.3% =========== =========== =========== After-tax operating loss $ (102,526) $ (37,569) NM =========== =========== ===========
5
PMA Capital Corporation Consolidated Balance Sheets (In Thousands) 4th 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Quarter 2002 2003 2003 2003 2003 ---------------------------------------------------------------------------------------------- Assets: Investments in fixed maturities available for sale $ 1,529,924 $ 1,641,593 $ 1,741,879 $ 1,807,977 $ 1,854,555 Short-term investments 298,686 199,782 282,366 187,320 151,332 Short-term investments, loaned securities collateral - 108,513 185,566 113,978 6,300 Cash 43,853 4,635 12,556 34,954 28,963 ----------------- ----------------- -------------------------------------------------------- Total investments and cash 1,872,463 1,954,523 2,222,367 2,144,229 2,041,150 Accrued investment income 18,600 22,426 19,357 23,764 20,870 Premiums receivable 363,675 457,528 394,065 379,041 364,125 Reinsurance receivables 1,295,083 1,314,103 1,307,506 1,252,928 1,220,320 Deferred income taxes 94,074 88,410 70,928 93,181 76,962 Deferred acquisition costs 89,222 103,275 108,740 105,089 83,975 Funds held by reinsureds 157,479 168,597 165,533 153,263 124,695 Other assets 215,198 222,595 249,110 255,292 255,861 ----------------- ----------------- ------------------ ------------------ ------------------ Total assets $ 4,105,794 $ 4,331,457 $ 4,537,606 $ 4,406,787 $ 4,187,958 ================= ================= ================== ================== ================== Liabilities: Unpaid losses and loss adjustment expenses $ 2,449,890 $ 2,448,147 $ 2,430,276 $ 2,486,776 $ 2,541,318 Unearned premiums 405,379 484,789 499,960 490,461 403,708 Debt 151,250 131,250 176,250 186,250 187,566 Accounts payable, accrued expenses and other liabilities 253,175 281,920 301,049 297,028 314,830 Funds held under reinsurance treaties 249,670 273,469 311,081 313,688 262,105 Dividends to policyholders 14,998 14,981 15,669 14,851 8,479 Payable under securities loan agreements 42 108,533 185,574 113,960 6,285 ----------------- ----------------- ------------------ ------------------ ------------------ Total liabilities 3,524,404 3,743,089 3,919,859 3,903,014 3,724,291 ----------------- ----------------- ------------------ ------------------ ------------------ 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 319,014 326,425 335,304 235,607 216,115 Accumulated other comprehensive income 34,552 34,119 54,621 40,341 19,622 Notes receivable from officers (62) (62) (64) (64) (65) Treasury stock, at cost (52,535) (52,535) (52,535) (52,532) (52,426) ----------------- ----------------- ------------------ ------------------ ------------------ Total shareholders' equity 581,390 588,368 617,747 503,773 463,667 ----------------- ----------------- ------------------ ------------------ ------------------ Total liabilities and shareholders' equity $ 4,105,794 $ 4,331,457 $ 4,537,606 $ 4,406,787 $ 4,187,958 ================= ================= ================== ================== ==================
6
PMA Capital Corporation Invested Assets and Net Investment Income (Dollars in Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve Quarter Quarter Quarter Quarter Quarter Months Months 2002 2003 2003 2003 2003 2003 2002 ----------------------------------------------------------------- ------------ ----------- Total Investments & Cash As Reported $ 1,872,463 $ 1,954,523 $ 2,222,367 $ 2,144,229 $ 2,041,150 $ 2,041,150 $ 1,872,463 Less: Securities Lending Activity 42 108,533 185,574 113,960 6,285 6,285 42 Unrealized Gain 51,172 51,031 81,025 58,200 48,282 48,282 51,172 ----------- ------------ ----------- ----------- ------------ ------------ ----------- Total Adjusted Investments & Cash $ 1,821,249 $ 1,794,959 $ 1,955,768 $ 1,972,069 $ 1,986,583 $ 1,986,583 $ 1,821,249 =========== ============ =========== =========== ============ ============ =========== Net Investment Income As Reported $ 21,008 $ 17,645 $ 17,780 $ 17,167 $ 16,331 $ 68,923 $ 84,881 Funds Held: Assumed 5,997 1,036 1,940 1,316 (296) 3,996 14,873 Ceded (5,740) (3,859) (3,567) (3,551) (3,427) (14,404) (17,762) ----------- ------------ ----------- ----------- ------------ ------------ ----------- Total Funds Held 257 (2,823) (1,627) (2,235) (3,723) (10,408) (2,889) ----------- ------------ ----------- ----------- ------------ ------------ ----------- Total Adjusted Investment Income $ 20,751 $ 20,468 $ 19,407 $ 19,402 $ 20,054 $ 79,331 $ 87,770 =========== ============ =========== =========== ============ ============ =========== Yield As Reported 4.49% 3.69% 3.41% 3.15% 3.12% 3.37% 4.50% Investment Portfolio 4.56% 4.53% 4.14% 3.95% 4.05% 4.16% 5.07% Duration (in years) 3.5 3.8 3.8 3.9 3.9 3.9 3.5 - ------------------------------------------------------------------------------------------------------------------------------------ PMA Capital Corporation Debt (Dollars in Thousands) Amount Outstanding Maturity ------------------------------------------- 4.25% convertible debt $ 86,250 2022 1 Trust preferred debt 2 43,816 2033 8.50% senior notes 57,500 2018 -------------------- Total long-term debt $ 187,566 ==================== 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. This debt may be converted at any time, at the holder's option, at a current price of $16.368 per share. 2 The increase of $1.3 million in trust preferred debt at December 31, 2003, compared to September 30, 2003, is due to the application of the provisions of FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities". Application of the provisions of FIN 46 required us to deconsolidate our wholly owned statutory trust subsidiaries, which resulted in an increase of $1.3 million of other assets and debt on our balance sheet. PMA Capital Corporation Other Assets and Liabilities (Dollars in Millions) Other Assets 12/31/2003 Other Liabilities 12/31/2003 - ------------ -------------------- ----------------- -------------------- Deposit assets (FASB #113) $ 49.2 Deposit liabilities (FASB #113) $ 76.1 Investment in Cathedral 34.2 Escrow liabilities 38.1 PP&E 32.1 Premium surcharges 34.3 Prepaid reinsurance premiums 30.3 Pension liabilities 30.6 Receivables- self-insured & Premium taxes and other assessments 26.2 large deductible clients 29.8 Ceded premiums payable 15.4 Prepaid pension asset 22.3 Accrued commissions 15.4 Escrow 22.2 Accrued postretirement benefits 13.5 Other 35.8 Accounts payable and other liabilities 65.2 -------------------- -------------------- Total: $ 255.9 Total: $ 314.8 ==================== ====================
7
PMA Capital Corporation Statements of Operations - Consolidating Year Ended December 31, 2003 (In Thousands) PMA Insurance Corporate Run-off Group PMA Re 1 & Other 2 Operations 3 Consolidated ------------------------------------------------------------------------- Gross Premiums Written $ 678,434 $ 750,873 $ (788) $ 1,125 $ 1,429,644 =========== =========== =========== =========== =========== Net Premiums Written $ 603,593 $ 595,074 $ (788) $ (5,625) $ 1,192,254 =========== =========== =========== =========== =========== Revenues: Net premiums earned $ 570,032 $ 624,249 $ (788) $ 4,672 $ 1,198,165 Net investment income 32,907 32,513 1,529 1,974 68,923 Other revenues 17,493 -- 386 2,500 20,379 ----------- ----------- ----------- ----------- ----------- Operating revenues 620,432 656,762 1,127 9,146 1,287,467 ----------- ----------- ----------- ----------- ----------- Losses and Expenses: Losses and loss adjustment expenses 442,502 549,379 -- 6,466 998,347 Acquisition expenses 90,575 164,944 -- 927 256,446 Operating expenses 65,173 21,872 14,056 2,571 103,672 Dividends to policyholders 641 -- -- -- 641 ----------- ----------- ----------- ----------- ----------- Total losses and expenses 598,891 736,195 14,056 9,964 1,359,106 ----------- ----------- ----------- ----------- ----------- Operating income (loss) before income taxes and interest expense 21,541 (79,433) (12,929) (818) (71,639) Interest expense -- -- 9,887 -- 9,887 ----------- ----------- ----------- ----------- ----------- Pre-tax operating income (loss) $ 21,541 $ (79,433) $ (22,816) $ (818) (81,526) =========== =========== =========== =========== Net realized investment gains 13,780 ----------- Pre-tax loss $ (67,746) =========== 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. 2 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 3 Formerly known as Caliber One.
8
PMA Capital Corporation Statements of Operations - Consolidating Year Ended December 31, 2002 (In Thousands) PMA Insurance Corporate Run-off Group PMA Re 1 & Other 2 Operations 3 Consolidated ---------------------------------------------------------------------------------- Gross Premiums Written $ 515,332 $ 776,787 $ (10,881) $ 105,308 $ 1,386,546 =========== =========== =========== =========== =========== Net Premiums Written $ 452,276 $ 639,039 $ (881) $ 14,563 $ 1,104,997 =========== =========== =========== =========== =========== Revenues: Net premiums earned $ 410,266 $ 551,513 $ (881) $ 30,113 $ 991,011 Net investment income 35,613 48,736 (608) 1,140 84,881 Other revenues 14,694 -- 636 -- 15,330 ----------- ----------- ----------- ----------- ----------- Operating revenues 460,573 600,249 (853) 31,253 1,091,222 ----------- ----------- ----------- ----------- ----------- Losses and Expenses: Losses and loss adjustment expenses 307,734 439,228 -- 76,696 823,658 Acquisition expenses 71,874 134,146 -- 10,964 216,984 Operating expenses 48,032 13,453 10,229 31,094 102,808 Dividends to policyholders 7,587 -- -- -- 7,587 ----------- ----------- ----------- ----------- ----------- Total losses and expenses 435,227 586,827 10,229 118,754 1,151,037 ----------- ----------- ----------- ----------- ----------- Operating income (loss) before income taxes and interest expense 25,346 13,422 (11,082) (87,501) (59,815) Interest expense -- -- 3,257 -- 3,257 ----------- ----------- ----------- ----------- ----------- Pre-tax operating income (loss) $ 25,346 $ 13,422 $ (14,339) $ (87,501) (63,072) =========== =========== =========== =========== =========== Net realized investment losses (16,085) ----------- Pre-tax loss $ (79,157) =========== 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. 2 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 3 Formerly known as Caliber One.
9
PMA Capital Corporation Insurance Ratios Year Ended December 31, 2003 PMA Insurance Group 1 PMA Re2 ------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 77.6% 88.0% -------------- -------------- Expense ratio: Acquisition expenses 15.9% 26.4% Operating expenses 9.2% 3.5% -------------- -------------- Total expense ratio 25.1% 29.9% -------------- -------------- Policyholders' dividend ratio 0.1% NA -------------- -------------- Combined ratio 102.8% 117.9% ============== ============== Net investment income ratio -5.8% -5.2% -------------- -------------- Operating ratio 97.0% 112.7% ============== ============== 1 The operating expense ratio and the combined ratio are computed based on $52.2 million of insurance-related operating expenses. 2 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off.
10
PMA Capital Corporation Insurance Ratios Year Ended December 31, 2002 PMA Insurance Group1 PMA Re2 -------------------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 75.0% 79.6% --------------------- --------------------- Expense ratio: Acquisition expenses 17.5% 24.3% Operating expenses 8.9% 2.5% --------------------- --------------------- Total expense ratio 26.4% 26.8% --------------------- --------------------- Policyholders' dividend ratio 1.8% NA --------------------- --------------------- Combined ratio 103.2% 106.4% ===================== ===================== Net investment income ratio -8.7% -8.8% --------------------- --------------------- Operating ratio 94.5% 97.6% ===================== ===================== 1 The operating expense ratio and the combined ratio are computed based on $36.7 million of insurance-related operating expenses. 2 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off.
11
PMA Capital Corporation Statements of Operations - Consolidating Three Months Ended December 31, 2003 (In Thousands) PMA Insurance Corporate Run-off Group PMA Re1 & Other2 Operations3 Consolidated --------------------------------------------------------------------------------- Gross Premiums Written $ 161,487 $ 133,783 $ (180) $ 581 $ 295,671 =============== =============== ============== ============== ================ Net Premiums Written $ 140,784 $ 124,261 $ (180) $ 592 $ 265,457 =============== =============== ============== ============== ================ Revenues: Net premiums earned $ 177,474 $ 168,646 $ (180) $ (949) $ 344,991 Net investment income 8,299 7,481 17 534 16,331 Other revenues 4,407 - 59 - 4,466 --------------- --------------- -------------- -------------- ---------------- Operating revenues 190,180 176,127 (104) (415) 365,788 --------------- --------------- -------------- -------------- ---------------- Losses and Expenses: Losses and loss adjustment expenses 154,069 112,021 - 809 266,899 Acquisition expenses 24,354 40,436 - - 64,790 Operating expenses 18,278 11,114 3,264 (405) 32,251 Dividends to policyholders (5,539) - - - (5,539) --------------- --------------- -------------- -------------- ---------------- Total losses and expenses 191,162 163,571 3,264 404 358,401 --------------- --------------- -------------- -------------- ---------------- Operating income (loss) before income taxes and interest expense (982) 12,556 (3,368) (819) 7,387 Interest expense - - 2,951 - 2,951 --------------- --------------- -------------- -------------- ---------------- Pre-tax operating income (loss) $ (982) $ 12,556 $ (6,319) $ (819) 4,436 =============== =============== ============== ============== Net realized investment gains 3,582 ---------------- Pre-tax income $ 8,018 ================ 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. 2 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 3 Formerly known as Caliber One.
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PMA Capital Corporation Statements of Operations - Consolidating Three Months Ended December 31, 2002 (In Thousands) PMA Insurance Corporate Run-off Group PMA Re1 & Other2 Operations3 Consolidated --------------------------------------------------------------------------------- Gross Premiums Written $ 91,886 $ 201,814 $ (10,228) $ (169) $ 283,303 =============== =============== ============== ============== ================ Net Premiums Written $ 73,549 $ 185,870 $ (228) $ (14,189) $ 245,002 =============== =============== ============== ============== ================ Revenues: Net premiums earned $ 100,736 $ 164,970 $ (228) $ (1,672) $ 263,806 Net investment income 8,611 11,588 245 564 21,008 Other revenues 3,807 - 52 - 3,859 --------------- --------------- -------------- -------------- ---------------- Operating revenues 113,154 176,558 69 (1,108) 288,673 --------------- --------------- -------------- -------------- ---------------- Losses and Expenses: Losses and loss adjustment expenses 77,185 167,798 - 5,715 250,698 Acquisition expenses 17,753 36,009 - 2,020 55,782 Operating expenses 12,267 1,231 1,578 (8,839) 6,237 Dividends to policyholders 111 - - - 111 --------------- --------------- -------------- -------------- ---------------- Total losses and expenses 107,316 205,038 1,578 (1,104) 312,828 --------------- --------------- -------------- -------------- ---------------- Operating income (loss) before income taxes and interest expense 5,838 (28,480) (1,509) (4) (24,155) Interest expense - - 1,639 - 1,639 --------------- --------------- -------------- -------------- ---------------- Pre-tax operating income (loss) $ 5,838 $ (28,480) $ (3,148) $ (4) (25,794) =============== =============== ============== ============== Net realized investment losses 3,943 ---------------- Pre-tax income $ (21,851) ================ 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. 2 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 3 Formerly known as Caliber One.
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PMA Capital Corporation Insurance Ratios Three Months Ended December 31, 2003 PMA Insurance Group1 PMA Re2 --------------------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 86.8% 66.4% --------------------- --------------------- Expense ratio: Acquisition expenses 13.7% 24.0% Operating expenses 8.2% 6.6% --------------------- --------------------- Total expense ratio 21.9% 30.6% --------------------- --------------------- Policyholders' dividend ratio -3.1% NA --------------------- --------------------- Combined ratio 105.6% 97.0% ===================== ===================== Net investment income ratio -4.7% -4.4% --------------------- --------------------- Operating ratio 100.9% 92.6% ===================== ===================== 1 The operating expense ratio and the combined ratio are computed based on $14.5 million of insurance-related operating expenses. 2 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off.
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PMA Capital Corporation Insurance Ratios Three Months Ended December 31, 2002 PMA Insurance Group1 PMA Re2 --------------------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 76.6% 101.7% --------------------- --------------------- Expense ratio: Acquisition expenses 17.6% 21.8% Operating expenses 9.2% 0.8% --------------------- --------------------- Total expense ratio 26.8% 22.6% --------------------- --------------------- Policyholders' dividend ratio 0.1% NA --------------------- --------------------- Combined ratio 103.5% 124.3% ===================== ===================== Net investment income ratio -8.5% -7.0% --------------------- --------------------- Operating ratio 95.0% 117.3% ===================== ===================== 1 The operating expense ratio and the combined ratio are computed based on $9.3 million of insurance-related operating expenses. 2 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off.
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PMA Capital Corporation Statements of Operations - PMA Insurance Group (Dollar Amounts in Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 4th Twelve 2002 2003 2003 2003 2003 2003 2002 Quarter Months -------------------------------------------------------------------------------------------- Gross Premiums Written $ 91,886 $ 213,721 $ 133,968 $ 169,258 $ 161,487 $ 678,434 $ 515,332 75.7% 31.6% ======== ========= ========= ========= ========= ========= ========= ===== ====== Net Premiums Written $ 73,549 $ 194,239 $ 119,440 $ 149,130 $ 140,784 $ 603,593 $ 452,276 91.4% 33.5% ======== ========= ========= ========= ========= ========= ========= ===== ====== Revenues: Net premiums earned $ 100,736 $ 116,241 $ 134,350 $ 141,967 $ 177,474 $ 570,032 $ 410,266 76.2% 38.9% Net investment income 8,611 8,271 8,203 8,134 8,299 32,907 35,613 -3.6% -7.6% Other revenues 3,807 4,431 4,577 4,078 4,407 17,493 14,694 15.8% 19.0% -------- --------- --------- --------- --------- --------- --------- ----- ------ Operating revenues 113,154 128,943 147,130 154,179 190,180 620,432 460,573 68.1% 34.7% -------- --------- --------- --------- --------- --------- --------- ----- ------ Losses and Expenses: Losses and loss adjustment expenses 77,185 84,035 99,201 105,197 154,069 442,502 307,734 99.6% 43.8% Acquisition expenses 17,753 19,582 22,824 23,815 24,354 90,575 71,874 37.2% 26.0% Operating expenses 12,267 14,950 16,213 15,732 18,278 65,173 48,032 49.0% 35.7% Dividends to policyholders 111 2,036 2,054 2,090 (5,539) 641 7,587 NM 91.6% -------- --------- --------- --------- --------- --------- --------- ----- ------ Total losses and expenses 107,316 120,603 140,292 146,834 191,162 598,891 435,227 78.1% 37.6% -------- --------- --------- --------- --------- --------- --------- ----- ------ Pre-tax operating income (loss) $ 5,838 $ 8,340 $ 6,838 $ 7,345 $ (982) 21,541 25,346 NM 15.0% ======== ========= ========= ========= ========= ========= ========= ===== ======
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PMA Capital Corporation Insurance Ratios - PMA Insurance Group 4th 1st 2nd 3rd 4th Twelve Twelve Point Chg. Point Chg. Quarter Quarter Quarter Quarter Quarter Months Months 4th Quarter Twelve Months 2002 2003 2003 2003 2003 2003 2002 Better (Worse) Better (Worse) --------------------------------------------------------------------------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 76.6% 72.3% 73.8% 74.1% 86.8% 77.6% 75.0% (10.2) (2.6) Expense ratio: Acquisition expenses 17.6% 16.8% 17.0% 16.8% 13.7% 15.9% 17.5% 3.9 1.6 Operating expenses 1 9.2% 10.4% 9.6% 8.9% 8.2% 9.2% 8.9% 1.0 (0.3) Total expense ratio 26.8% 27.2% 26.6% 25.7% 21.9% 25.1% 26.4% 4.9 1.3 Policyholders' dividend ratio 0.1% 1.8% 1.5% 1.5% -3.1% 0.1% 1.8% 3.2 1.7 Combined ratio 103.5% 101.3% 101.9% 101.3% 105.6% 102.8% 103.2% (2.1) 0.4 Net investment income ratio -8.5% -7.1% -6.1% -5.7% -4.7% -5.8% -8.7% (3.8) (2.9) Operating ratio 95.0% 94.2% 95.8% 95.6% 100.9% 97.0% 94.5% (5.9) (2.5) 1 The operating expense ratio equals insurance-related operating expenses divided by net premiums earned. Insurance-related operating expenses were $9.3 million, $12.1 million, $12.9 million, $12.7 million and $14.5 million for the fourth quarter of 2002 and the first, second, third and fourth quarters of 2003, respectively.
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PMA Capital Corporation Statements of Operations - PMA Re 1 (Dollar Amounts in Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 4th Twelve 2002 2003 2003 2003 2003 2003 2002 Quarter Months -------------------------------------------------------------------------------------------------------- Gross Premiums Written $ 201,814 $ 206,119 $ 227,860 $ 183,111 $ 133,783 $ 750,873 $ 776,787 -33.7% -3.3% ========= ========= ========= ========= ========= ========= ========= ====== ====== Net Premiums Written $ 185,870 $ 158,579 $ 172,464 $ 139,770 $ 124,261 $ 595,074 $ 639,039 -33.1% -6.9% ========= ========= ========= ========= ========= ========= ========= ====== ====== Revenues: Net premiums earned $ 164,970 $ 151,239 $ 151,004 $ 153,360 $ 168,646 $ 624,249 $ 551,513 2.2% 13.2% Net investment income 11,588 8,431 8,611 7,990 7,481 32,513 48,736 -35.4% -33.3% --------- --------- --------- --------- --------- --------- --------- ----- ------- Operating revenues 176,558 159,670 159,615 161,350 176,127 656,762 600,249 -0.2% 9.4% --------- --------- --------- --------- --------- --------- --------- ----- ------- Losses and Expenses: Losses and loss adjustment expenses 167,798 112,675 93,280 231,403 112,021 549,379 439,228 -33.2% 25.1% Acquisition expenses 36,009 35,773 49,329 39,406 40,436 164,944 134,146 12.3% 23.0% Operating expenses 1,231 2,645 3,899 4,214 11,114 21,872 13,453 NM 62.6% --------- --------- --------- --------- --------- --------- --------- ----- ------- Total losses and expenses 205,038 151,093 146,508 275,023 163,571 736,195 586,827 -20.2% 25.5% --------- --------- --------- --------- --------- --------- --------- ----- ------- Pre-tax operating income (loss) $ (28,480) $ 8,577 $ 13,107 $(113,673) $ 12,556 (79,433) 13,422 NM NM ========= ========= ========= ========= ========= ========= ========= ====== ====== 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off.
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PMA Capital Corporation Insurance Ratios - PMA Re 1 4th 1st 2nd 3rd 4th Twelve Twelve Point Chg. Point Chg. Quarter Quarter Quarter Quarter Quarter Months Months 4th Quarter Twelve Months 2002 2003 2003 2003 2003 2003 2002 Better (Worse) Better (Worse) ------------------------------------------------------------------------------------------ Ratios - GAAP Basis: Loss and LAE ratio 101.7% 74.5% 61.8% 150.9% 66.4% 88.0% 79.6% 35.3 (8.4) ------ ------ ----- ------ ----- ----- ----- ---- ----- Expense ratio: Acquisition expenses 21.8% 23.7% 32.7% 25.7% 24.0% 26.4% 24.3% (2.2) (2.1) Operating expenses 0.8% 1.7% 2.5% 2.7% 6.6% 3.5% 2.5% (5.8) (1.0) ------ ------ ----- ------ ----- ----- ----- ---- ----- Total expense ratio 22.6% 25.4% 35.2% 28.4% 30.6% 29.9% 26.8% (8.0) (3.1) ------ ------ ----- ------ ----- ----- ----- ---- ----- Combined ratio 124.3% 99.9% 97.0% 179.3% 97.0% 117.9% 106.4% 27.3 (11.5) ===== ====== ===== ====== ===== ===== ===== ==== ===== Net investment income ratio -7.0% -5.6% -5.7% -5.2% -4.4% -5.2% -8.8% (2.6) (3.6) ------ ------ ----- ------ ----- ----- ----- ---- ----- Operating ratio 117.3% 94.3% 91.3% 174.1% 92.6% 112.7% 97.6% 24.7 (15.1) ===== ====== ===== ====== ===== ===== ===== ==== ===== 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off.
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PMA Capital Corporation Statements of Operations - Run-off Operations 1 (Dollar Amounts in Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 4th Twelve 2002 2003 2003 2003 2003 2003 2002 Quarter Months ----------------------------------------------------------------------------------------------------- Gross Premiums Written $ (169) $ 110 $ 195 $ 239 $ 581 $ 1,125 $ 105,308 NM -98.9% ============ ============ ============ ========= ============ ============ ======= ==== ============ Net Premiums Written $ (14,189) $ (1,704) $ (1,124) $ (3,389) $ 592 $ (5,625) $ 14,563 NM NM ============ ============ ============ ========= ============ ============ ======= ==== ============ Revenues: Net premiums earned $ (1,672) $ 6,846 $ 392 $ (1,617) $ (949) $ 4,672 $ 30,113 43.2% -84.5% Net investment income 564 361 528 551 534 1,974 1,140 -5.3% 73.2% Other revenues -- 2,500 -- -- -- 2,500 -- NM NM ------------ ------------ ------------ --------- ------------ ------------ ------- ---- ------------ Operating revenues (1,108) 9,707 920 (1,066) (415) 9,146 31,253 62.5% -70.7% ------------ ------------ ------------ --------- ------------ ------------ ------- ---- ------------ Losses and Expenses: Losses and loss adjustment expenses 5,715 5,875 593 (811) 809 6,466 76,696 -85.8% -91.6% Acquisition expenses 2,020 865 62 -- -- 927 10,964 -100.0% -91.5% Operating expenses (8,839) 2,966 268 (258) (405) 2,571 31,094 95.4% - 91.7% ------------ ------------ ------------ --------- ------------ ------------ ------- ---- ------------ Total losses and expenses (1,104) 9,706 923 (1,069) 404 9,964 118,754 NM -91.6% ------------ ------------ ------------ --------- ------------ ------------ ------- ---- ------------ Pre-tax operating income (loss) $ (4) $ 1 $ (3) $ 3 $ (819) $ (818) $ (87,501) NM 99.1% ============ ============ ============ ========= ============ ============ ======= ==== ============ 1 Formerly known as Caliber One.
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PMA Capital Corporation Statements of Operations - Corporate & Other (Dollar Amounts in Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve % Change % Change Quarter Quarter Quarter Quarter Quarter Months Months 4th Twelve 2002 2003 2003 2003 2003 2003 2002 Quarter Months ----------------------------------------------------------------------------------------------------- Gross Premiums Written $(10,228) $ (256) $ (124) $ (228) $ (180) $ (788) $(10,881) 98.2% 92.8% ======== ======== ======== ======== ======== ======== ======== ======== ======== Net Premiums Written $ (228) $ (256) $ (124) $ (228) $ (180) $ (788) $ (881) 21.1% 10.6% ======== ======== ======== ======== ======== ======== ======== ======== ======== Revenues: Net premiums earned $ (228) $ (256) $ (124) $ (228) $ (180) $ (788) $ (881) 21.1% 10.6% Net investment income 245 582 438 492 17 1,529 (608) -93.1% NM Other revenues 52 69 189 69 59 386 636 13.5% -39.3% -------- -------- -------- -------- -------- -------- -------- -------- -------- Operating revenues 69 395 503 333 (104) 1,127 (853) NM NM -------- -------- -------- -------- -------- -------- -------- -------- -------- Losses and Expenses: Operating expenses 1,578 3,311 3,842 3,639 3,264 14,056 10,229 106.8% 37.4% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total losses and expenses 1,578 3,311 3,842 3,639 3,264 14,056 10,229 106.8% 37.4% -------- -------- -------- -------- -------- -------- -------- -------- -------- Operating loss before income taxes and interest expense (1,509) (2,916) (3,339) (3,306) (3,368) (12,929) (11,082) NM -16.7% Interest expense 1,639 1,758 2,225 2,953 2,951 9,887 3,257 80.0% 203.6% -------- -------- -------- -------- -------- -------- -------- -------- -------- Pre-tax operating loss $ (3,148) $ (4,674) $ (5,564) $ (6,259) (6,319) (22,816) (14,339) NM -59.1% ======== ======== ======== ======== ======== ======== ======== ======== ========
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PMA Capital Corporation Operating Cash Flows - Consolidated (In Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve Quarter Quarter Quarter Quarter Quarter Months Months 2002 2003 2003 2003 2003 2003 2002 --------------------------------------------------------------------------------------------------- Receipts: Premiums and other revenues collected $ 272,335 $ 274,221 $ 393,639 $ 319,594 $ 243,436 $ 1,230,890 $ 1,080,302 Investment income received 24,706 20,108 27,434 20,079 27,690 95,311 92,207 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total receipts 297,041 294,329 421,073 339,673 271,126 1,326,201 1,172,509 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 59,147 6,787 35,305 83,436 60,322 185,850 138,127 Losses and LAE paid - prior years 113,417 210,892 183,345 139,352 124,280 657,869 627,311 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total losses and LAE paid 172,564 217,679 218,650 222,788 184,602 843,719 765,438 Insurance operating expenses pai 67,197 78,957 100,177 64,223 68,280 311,637 297,633 Policyholders' dividends paid 1,868 1,627 1,439 2,880 773 6,719 9,352 Interest on corporate debt 239 2,484 502 3,582 1,798 8,366 2,091 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total disbursements 241,868 300,747 320,768 293,473 255,453 1,170,441 1,074,514 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net other 9,042 (4,358) 3,373 (6,092) 947 (6,130) (25,828) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net operating cash flows $ 64,215 $ (10,776) $ 103,678 $ 40,108 $ 16,620 $ 149,630 $ 72,167 =========== =========== =========== =========== =========== =========== =========== 22
PMA Capital Corporation Operating Cash Flows - PMA Insurance Group (In Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve Quarter Quarter Quarter Quarter Quarter Months Months 2002 2003 2003 2003 2003 2003 2002 ---------------------------------------------------------------------------------------- Receipts: Premiums and other revenues collected $ 129,911 $ 120,589 $ 138,915 $ 150,684 $ 147,111 $ 557,299 $ 472,186 Investment income received 9,859 9,340 9,772 9,523 9,433 38,068 38,761 --------- --------- --------- --------- --------- --------- --------- Total receipts 139,770 129,929 148,687 160,207 156,544 595,367 510,947 --------- --------- --------- --------- --------- --------- --------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 38,742 5,226 24,316 37,387 35,923 102,852 87,417 Losses and LAE paid - prior years 40,901 83,269 60,049 57,474 56,739 257,531 250,218 --------- --------- --------- --------- --------- --------- --------- Losses and LAE 79,643 88,495 84,365 94,861 92,662 360,383 337,635 Insurance operating expenses paid 21,637 37,212 37,214 22,578 35,721 132,725 112,486 Policyholders' dividends paid 1,868 1,627 1,439 2,880 773 6,719 9,352 --------- --------- --------- --------- --------- --------- --------- Total disbursements 103,148 127,334 123,018 120,319 129,156 499,827 459,473 --------- --------- --------- --------- --------- --------- --------- Net other 4,338 (5,052) (1,795) (8,839) (7,150) (22,836) (1,217) --------- --------- --------- --------- --------- --------- --------- Net operating cash flows $ 40,960 $ (2,457) $ 23,874 $ 31,049 $ 20,238 $ 72,704 $ 50,257 ========= ========= ========= ========= ========= ========= =========
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PMA Capital Corporation Operating Cash Flows - PMA Re 1 (In Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve Quarter Quarter Quarter Quarter Quarter Months Months 2002 2003 2003 2003 2003 2003 2002 -------------------------------------------------------------------------------------------- Receipts: Premiums collected $ 144,418 $ 154,610 $ 256,727 $ 170,802 $ 96,971 $ 679,110 $ 559,806 Investment income received 13,740 9,162 16,007 9,107 16,897 51,173 49,191 --------- --------- --------- --------- --------- --------- --------- Total receipts 158,158 163,772 272,734 179,909 113,868 730,283 608,997 --------- --------- --------- --------- --------- --------- --------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 17,895 865 9,701 45,427 23,198 79,191 39,199 Losses and LAE paid - prior years 58,008 115,870 104,331 73,694 53,940 347,835 319,330 --------- --------- --------- --------- --------- --------- --------- Total losses and LAE paid 75,903 116,735 114,032 119,121 77,138 427,026 358,529 Insurance operating expenses paid 40,788 39,418 61,197 40,686 32,480 173,781 164,560 --------- --------- --------- --------- --------- --------- --------- Total disbursements 116,691 156,153 175,229 159,807 109,618 600,807 523,089 --------- --------- --------- --------- --------- --------- --------- Net other 13,613 660 8,572 1,501 9,028 19,761 (12,688) --------- --------- --------- --------- --------- --------- --------- Net operating cash flows $ 55,080 $ 8,279 $ 106,077 $ 21,603 $ 13,278 $ 149,237 $ 73,220 ========= ========= ========= ========= ========= ========= ========= 1 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Re. This segment is currently in run-off. 24
PMA Capital Corporation Operating Cash Flows - Run-off Operations 1 (In Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve Quarter Quarter Quarter Quarter Quarter Months Months 2002 2003 2003 2003 2003 2003 2002 -------------------------------------------------------------------------------------------- Receipts: Net premiums collected (paid) $ (1,994) $ (978) $ (2,003) $ (1,892) $ (646) $ (5,519) $ 48,310 Investment income received 1,107 1,606 1,655 1,449 1,360 6,070 4,255 -------- -------- -------- -------- -------- -------- -------- Total receipts (887) 628 (348) (443) 714 551 52,565 -------- -------- -------- -------- -------- -------- -------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 2,510 696 1,288 622 1,201 3,807 11,511 Losses and LAE paid - prior years 14,508 11,753 18,965 8,184 13,601 52,503 57,763 -------- -------- -------- -------- -------- -------- -------- Total losses and LAE paid 17,018 12,449 20,253 8,806 14,802 56,310 69,274 Insurance operating expenses paid 4,772 2,327 1,766 959 79 5,131 20,587 -------- -------- -------- -------- -------- -------- -------- Total disbursements 21,790 14,776 22,019 9,765 14,881 61,441 89,861 -------- -------- -------- -------- -------- -------- -------- Net other 5,784 74 (20) (2,279) 3,466 1,241 (5,387) -------- -------- -------- -------- -------- -------- -------- Net operating cash flows $(16,893) $(14,074) $(22,387) $(12,487) $(10,701) $(59,649) $(42,683) ======== ======== ======== ======== ======== ======== ======== 1 Formerly known as Caliber One.
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PMA Capital Corporation Statutory Surplus (In Thousands) 4th 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Quarter 2002 2003 2003 2003 20031 ------------------------------------------------ ----------- PMA Pool 2 $ 305,533 $ 302,646 $ 304,109 $ 301,684 $ 296,757 PMA Capital Insurance Company 3 580,151 554,611 581,821 477,391 500,597 Caliber One Indemnity Company 26,844 - - - - Eliminations 4 (332,377) (302,646) (304,109) (301,684) (296,757) ----------- ----------- ----------- ----------- ----------- Total $ 580,151 $ 554,611 $ 581,821 $ 477,391 $ 500,597 =========== =========== =========== =========== =========== PMA Capital Corporation Statutory Financial Information - PMA Pool 2 (In Thousands) 4th 1st 2nd 3rd 4th Twelve Twelve Quarter Quarter Quarter Quarter Quarter Months Months 2002 2003 2003 2003 2003 1 2003 1 2002 -------------------------------------------------------------------------------------- Net Premiums Written: Workers Compensation & Integrated Disability $ 44,594 $ 147,425 $ 91,269 $ 116,397 $ 77,362 $ 432,453 $ 337,945 Other Commercial Lines 14,878 28,255 25,914 17,424 14,386 85,979 73,005 ----------- ----------- ----------- ----------- ----------- ---------- ---------- Total - PMA Pool $ 59,472 $ 175,680 $ 117,183 $ 133,821 $ 91,748 $ 518,432 $ 410,950 =========== =========== =========== =========== =========== ========== ========== Statutory Ratios: Loss and LAE ratio 77.5% 73.3% 73.6% 74.4% 87.2% 78.0% 75.3% Underwriting expense ratio 39.6% 21.5% 28.5% 24.9% 34.6% 26.2% 25.7% Policyholders' dividend ratio 0.1% 1.6% 1.6% 1.7% -3.4% 0.0% 2.0% ----------- ----------- ----------- ----------- ----------- ---------- ---------- Combined ratio 117.2% 96.4% 103.7% 101.0% 118.4% 104.2% 103.0% =========== =========== =========== =========== =========== ========== ========== Operating ratio 107.1% 83.0% 97.9% 94.9% 113.9% 97.3% 92.9% =========== =========== =========== =========== =========== ========== ==========
1 Estimated. 2 The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company. 3 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Capital Insurance Company. The reinsurance business is currently in run-off. 4 Surplus for PMA Pool and Caliber One Indemnity Company is eliminated as it is included in the statutory surplus of PMA Capital Insurance Company. 27
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 2/10/2004): A.M. Best Moody's ------------------ -------------------- PMA Pool 1 B++ (5th of 16) Ba1 (11th of 21) PMA Capital Insurance Company 2 B++ (5th of 16) B1 (14th of 21) 1 The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company. 2 On November 6, 2003 we announced our decision to withdraw from the reinsurance business previously served by PMA Capital Insurance Company. The reinsurance business is currently in run-off. 28
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