-----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, SqOlVqLPX5ajd7QhCBV+wiHsovVXtASl+pPkExwLQAeX8uvIARfupl9mCXVOykC9 aYR67+L42mUiBXQpasZBmQ== 0000950159-04-000938.txt : 20041028 0000950159-04-000938.hdr.sgml : 20041028 20041028172640 ACCESSION NUMBER: 0000950159-04-000938 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041028 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041028 DATE AS OF CHANGE: 20041028 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: 041103588 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 pma8k.htm PMA CAPITAL CORPORATION FORM 8K

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): October 28, 2004

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 3000
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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[X]  

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]  

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]  

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Item 2.02. Results of Operations and Financial Condition.

                On October 28, 2004, the registrant issued a news release regarding its Third Quarter 2004 results, a copy of which is furnished as Exhibit 99.1 hereto and is incorporated herein by reference, and the Company’s Third Quarter 2004 Statistical Supplement is furnished as Exhibit 99.2 and is incorporated herein by reference.

                The registrant is using this Current Report to satisfy its filing obligations pursuant to Rule 425 under the Securities Act of 1933, as amended, regarding written communications. Investors and security holders are urged to read the following documents filed with the SEC, as amended from time to time, relating to the proposed exchange offer because they contain important information: (1) the registration statement on Form S-4 (File No. 333-119435), and (2) The Schedule TO (File No. 005-53303). These and any other documents relating to the proposed exchange offer, when they are filed with the SEC, may be obtained free at the SEC’s Web site at www.sec.gov.

                Except as stated below, the information, including Exhibit 99.1 attached hereto, furnished under this Item 2.02 shall be deemed “filed” for the purposes of the Securities Exchange Act of 1934, as amended. The information contained in Exhibit 99.2 attached hereto 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 and such information 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.

Item 9.01. Financial Statements and Exhibits.

                (c) The exhibits accompanying this report are listed in the Index to Exhibits on page E-1, which is incorporated herein by reference.



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: October 28, 2004 By: /s/ William E. Hitselberger
        William E. Hitselberger
        Executive Vice President, Chief Financial
      Officer and Treasurer



3


Index to Exhibits

   
     
Number Description Method of Filing
 
99.1 PMA Capital Corporation
news release dated
October 28, 2004 1		 Filed herewith
 
99.2 PMA Capital Corporation
Third Quarter 2004 Statistical
Supplement		 Filed herewith
 








_________________

1 Deemed "filed" pursuant to General Instruction B.2. of Form 8-K.


E-1



EX-99 2 pmaex99-1.htm EXHIBIT 99.1 PMA Capital Exhibit 99.1

PMA Capital
A Specialty Risk Management Company

[GRAPHIC OMITTED]

Mellon Bank Center
1735 Market Street
Philadelphia, PA 19103-7590

PRESS RELEASE   


For Release:   Immediate
Contact:          William Hitselberger
                          (215) 665-5046

PMA Capital Announces Third Quarter 2004 Results

Philadelphia, PA, October 28, 2004 — PMA Capital (NASDAQ: PMACA) today announced financial results for the third quarter and nine months ended September 30, 2004. For the third quarter, results were essentially breakeven, compared to a net loss of $96.4 million, or $3.08 per share, for the same period last year. PMA Capital had net income of $12.1 million, or 38 cents per diluted share, for the first nine months of 2004, compared to a net loss of $73.5 million, or $2.35 per share, for the same period last year.

Included in results for the third quarter and the first nine months of 2004 were after-tax net realized investment gains of $2.3 million, or 8 cents per diluted share, and $9.3 million, or 26 cents per diluted share, compared to $905,000, or 3 cents per share, and $6.6 million, or 21 cents per share, for the same periods last year. Results for the third quarter of 2004 include after-tax losses of $1.8 million, or 6 cents per share, from hurricanes Charley, Frances, Ivan and Jeanne. Results for the first nine months of 2004 also include after-tax charges of $3.4 million, or 9 cents per diluted share, to purchase reinsurance covering potential adverse loss development at the Run-off Operations. Results for 2003 include an after-tax charge of $97.5 million, or $3.11 per share, to increase loss reserves for our reinsurance business at September 30, 2003 and a charge of $24 million, or 77 cents per share, to record a valuation allowance on our deferred tax asset.

Consolidated revenues for the third quarters of 2004 and 2003 were $125.5 million and $316.2 million, respectively. For the first nine months of 2004, revenues were $502.9 million, compared to $931.9 million for the same period in 2003. The lower revenues for the quarter and year-to-date periods reflect lower net premiums earned due to our fourth quarter 2003 withdrawal from the reinsurance business and, to a lesser extent, the impact of the B++ financial strength rating on The PMA Insurance Group.

Vincent T. Donnelly, President and Chief Executive Officer commented, “Thus far, 2004 has been a transition year for PMA Capital. Despite the challenges of reduced premium writings, we have remained profitable on a year-to-date basis. Our withdrawal from the reinsurance business continues in an orderly matter, and we continue to take the necessary steps in an effort to restore The PMA Insurance Group’s A- A.M. Best financial strength rating.”


Mr. Donnelly continued, “Earlier this month, we initiated an exchange offer for our convertible debt in order to refinance our existing Convertible Debentures with new Convertible Debentures with a later put date. We believe that this transaction will improve our financial flexibility, and will benefit us as we work to improve the financial strength ratings of The PMA Insurance Group as well as our debt ratings. Based on discussions with certain of the existing debenture holders, we believe that the amended terms are acceptable to a significant majority of the existing debenture holders, subject to review of the offer documents.”

Financial Condition
Total assets were $3.5 billion as of September 30, 2004, compared to $4.2 billion as of December 31, 2003. Shareholders’ equity was $458.1 million as of September 30, 2004, compared to $463.7 million as of December 31, 2003. Book value per share was $14.46 as of September 30, 2004, compared with $14.80 as of December 31, 2003. The decreases in shareholders’ equity and book value per share are primarily due to lower net unrealized holding gains on fixed maturities. Net unrealized holding gains were $15.4 million, or 48 cents per share, as of September 30, 2004, compared to $31.4 million, or $1.00 per share, at year-end 2003, mainly due to higher market interest rates. Total outstanding debt was $187.6 million as of September 30, 2004 and December 31, 2003. At September 30, 2004, we had $17.1 million in cash and short-term investments at the holding company.

The statutory surplus of The PMA Insurance Group was $294.6 million at September 30, 2004, after giving effect to a $12 million dividend paid to PMA Capital Corporation in September 2004, compared to $296.8 million at December 31, 2003. The PMA Insurance Group has the ability to pay $11 million in dividends for the remainder of 2004 without the prior approval of the Pennsylvania Insurance Commissioner. The statutory surplus of PMA Capital Insurance Company (“PMACIC”), PMA Capital Corporation’s directly held reinsurance subsidiary, was $236.4 million at September 30, 2004, compared to $500.6 million at December 31, 2003. The statutory surplus of PMACIC at December 31, 2003 included $296.8 million of statutory surplus from the insurance subsidiaries comprising The PMA Insurance Group.


2


Segment Operating Results
Operating income (loss), which we define as net income (loss) under accounting principles generally accepted in the United States of America (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 segment operating results as discussed below to GAAP net income (loss) is provided below.

    Three months ended
    September 30,		       Nine months ended
      September 30,
(in thousands)   2004   2003   2004   2003  
Pre-tax operating income (loss):                    
   The PMA Insurance Group   $ 3,537   $ 7,345   $ 12,905   $ 22,523  
   Run-off Operations (1)    (2,115 )  (113,701 )  7,455    (92,082 )
   Corporate & Other    (4,982 )  (6,228 )  (15,800 )  (16,403 )
Net realized investment gains    3,515    1,392    14,363    10,198  
Pre-tax income (loss)    (45 )  (111,192 )  18,923    (75,764 )
Income tax expense (benefit)    29    (14,786 )  6,780    (2,227 )
Net income (loss)   $ (74 ) $ (96,406 ) $ 12,143   $ (73,537 )
 


(1)  

In November 2003, we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are now reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.


The PMA Insurance Group
The PMA Insurance Group reported pre-tax operating income of $3.5 million and $12.9 million for the third quarter and first nine months of 2004, compared to $7.3 million and $22.5 million for the same periods last year, primarily reflecting lower underwriting results.

Net premiums written were $97.6 million for the third quarter of 2004, compared with $149.1 million for the third quarter of 2003. Net premiums written were $314.9 million for the first nine months of 2004, compared with $462.8 million for the same period last year. The lower net premiums are primarily a result of the A.M. Best financial strength rating downgrade to B++ in November 2003. Our renewal retention rate on existing workers’ compensation accounts was 62% in the first nine months of 2004. New business production continued in 2004, although at a lower rate than in 2003. The PMA Insurance Group continues to obtain price increases in all of its commercial lines of business, although at lower rates of increase than in 2003. Average rate increases for workers’ compensation business were approximately 6% so far in 2004.

The combined ratio on a GAAP basis in 2004 was 105.5% for the third quarter and 104.5% for the first nine months of 2004, compared to 101.3% and 101.5% for the same periods last year. Losses from the third quarter hurricanes totaled $1 million, which added 1.0 point and 0.3 points to the combined ratios for the third quarter and first nine months of 2004, respectively. In addition, the increases in the combined ratio primarily reflect a higher total expense ratio and, to a lesser extent, a higher current accident year loss ratio. Overall loss trends in workers’ compensation are rising modestly ahead of price




3


increases, with medical inflation being the largest driver of these loss trends. We estimate medical cost inflation, which is the primary reason for increasing loss costs in 2004, to be approximately 11%.

Net investment income was essentially flat for the third quarter and first nine months of 2004, compared to the same periods of 2003, reflecting a higher average invested asset base, offset by lower yields on the portfolio.

Run-off Operations
Results of the Run-off Operations are driven principally by underwriting results from our former PMA Re operating segment. Run-off Operations also includes the results of our former excess and surplus lines business.

The Run-off Operations recorded a pre-tax operating loss of $2.1 million for the third quarter and pre-tax operating income of $7.5 million for the first nine months of 2004, compared to pre-tax operating losses of $113.7 million and $92.1 million for the same periods in 2003. Results for the third quarter of 2004 include $1.7 million of hurricane losses and $1.2 million for the reinsurance agreement covering potential adverse loss development, partially offset by a $1.2 million gain on the sale of our remaining ownership in Cathedral Capital PLC, a Lloyd’s of London managing general agency. Year-to-date 2004 results include charges of $5.2 million for the reinsurance agreement covering potential adverse loss development, partially offset by gains of $2.5 million from the sales of our ownership interest in Cathedral Capital PLC. Pre-tax operating results for 2003 reflect the $150 million ($97.5 million after-tax) third quarter reserve charge associated mainly with accident years 1997 to 2000.

Results for the Run-off Operations for the first nine months of 2004 will not be indicative of results for the remainder of 2004 due to our expectation that earned premiums will decrease significantly in the fourth quarter of 2004, compared to the first nine months, and due to the unpredictability of the impact of future commutations. Through the first nine months of 2004, the Run-off Operations have commuted or novated policies which have reduced loss reserves by $202 million.

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 $5.0 million and $15.8 million for the three and nine months ended September 30, 2004, respectively, compared to pre-tax operating losses of $6.2 million and $16.4 million for the same periods last year, reflecting lower operating expenses, partially offset by higher interest expense for the first nine months of 2004. Interest expense for the first nine months of 2004 increased by $1.9 million over the comparable period last year, primarily due to a higher average amount of debt outstanding in 2004, compared with last year.

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, October 29th to review our third quarter 2004 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 and passcodes for the conference call are as follows:

Live Call   Replay  
800-260-8140 (Domestic)  888-286-8010 (Domestic) 
617-614-3672 (International)  617-801-6888 (International) 
Passcode 90452435  Passcode 87826044 



4


A replay of the conference call will be available over the Internet or by dialing the call-in number for the replay and using the passcode. The replay will be available from approximately 11:30 a.m. Eastern Time on Friday, October 29th until 11:59 p.m. Eastern Time on Tuesday, November 30th.

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. We have also furnished a copy of this news release and the Statistical Supplement to the SEC under cover of Form 8-K dated October 28, 2004. A copy of the Form 8-K is available on the SEC’s website at www.sec.gov.




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:

•  

our ability to effect an efficient withdrawal from the reinsurance business, including the commutation of reinsurance business with certain large ceding companies, without incurring any significant liabilities;

•  

The PMA Insurance Group’s ability to have its former “A-” A.M. Best financial strength rating restored and the effect of its present “B++” A.M. Best rating on its premium writings and profitability as well as the adverse impact of any potential future downgrade of its rating;

•  

the lowering or loss of one or more of our 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, including unforeseen increases in medical costs;

•  

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;

•  

our ability to have sufficient cash at the holding company to meet our debt service and other obligations, including any restrictions such as those imposed by the Pennsylvania Insurance Department on receiving dividends from our insurance subsidiaries in an amount sufficient to meet such obligations;

•  

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

adequacy and collectibility of reinsurance that we purchased;

•  

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

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;

•  

the outcome of the Convertible Debenture exchange offer; and

•  

other factors or uncertainties disclosed from time to time in our filings with the SEC.


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
Selected Financial Data
(Unaudited)

         
   Three months ended September 30,  
(dollars in thousands)     2004    2003  
 Net premiums written:            
        The PMA Insurance Group   $ 97,637   $ 149,130  
        Run-off Operations (1)    (13,884 )  136,381  
        Corporate and Other    (186 )  (228 )
 Consolidated net premiums written   $ 83,567   $ 285,283  
 Revenues:  
 Net premiums earned:  
        The PMA Insurance Group   $ 103,032   $ 141,967  
        Run-off Operations (1)    1,364    151,743  
        Corporate and Other    (186 )  (228 )
 Consolidated net premiums earned    104,210    293,482  
 Net investment income    13,238    17,167  
 Realized gains    3,515    1,392  
 Other revenues    4,505    4,147  
 Consolidated revenues   $ 125,468   $ 316,188  
 Components of net loss:  
 Pre-tax operating income (loss) (2):  
        The PMA Insurance Group   $ 3,537   $ 7,345  
        Run-off Operations (1)    (2,115 )  (113,701 )
        Corporate and Other    (4,982 )  (6,228 )
 Realized gains    3,515    1,392  
 Pre-tax loss    (45 )  (111,192 )
 Income tax expense (benefit)    29    (14,786 )
 Net loss   $ (74 ) $ (96,406 )
 Weighted average common shares outstanding      
        Basic    31,350,825    31,328,965  
        Diluted    31,350,825    31,328,965  
 


(1)  

In November 2003, we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are now reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.

(2)  

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.




7


PMA Capital Corporation
Selected Financial Data
(Unaudited)

         
   Nine months ended September 30,  
(dollars in thousands)     2004    2003  
 Net premiums written:            
        The PMA Insurance Group   $ 314,885   $ 462,809  
        Run-off Operations (1)    (69,386 )  464,596  
        Corporate and Other    (561 )  (608 )
 Consolidated net premiums written   $ 244,938   $ 926,797  
 Revenues:  
 Net premiums earned:  
        The PMA Insurance Group   $ 352,970   $ 392,558  
        Run-off Operations (1)    76,418    461,224  
        Corporate and Other    (561 )  (608 )
 Consolidated net premiums earned    428,827    853,174  
 Net investment income    44,803    52,592  
 Realized gains    14,363    10,198  
 Other revenues    14,923    15,913  
 Consolidated revenues   $ 502,916   $ 931,877  
 Components of net income (loss):  
 Pre-tax operating income (loss) (2):  
        The PMA Insurance Group   $ 12,905   $ 22,523  
        Run-off Operations (1)    7,455    (92,082 )
        Corporate and Other    (15,800 )  (16,403 )
 Realized gains    14,363    10,198  
 Pre-tax income (loss)    18,923    (75,764 )
 Income tax expense (benefit)    6,780    (2,227 )
 Net income (loss)   $ 12,143   $ (73,537 )
 Weighted average common shares outstanding      
        Basic    31,342,854    31,328,936  
        Diluted    36,903,965    31,328,936  


(1)  

In November 2003, we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are now reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.

(2)  

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.



8


PMA Capital Corporation
GAAP Consolidated Balance Sheets
(Unaudited)

         
(in thousands, except per share data)    September 30,
2004    		    December 31,
2003		  
Assets:            
Investments and cash:  
      Fixed maturities available for sale   $ 1,381,788   $ 1,854,555  
      Short-term investments    98,761    151,332  
      Short-term investments, loaned securities collateral    96,606    6,300  
      Cash    48,046    28,963  
      Total investments and cash    1,625,201    2,041,150  
             
Accrued investment income    16,407    20,870  
Premiums receivable    219,111    364,125  
Reinsurance receivables    1,170,004    1,220,320  
Deferred income taxes    80,541    76,962  
Deferred acquisition costs    37,800    83,975  
Funds held by reinsureds    111,840    124,695  
Other assets    219,536    255,861  
      Total assets   $ 3,480,440   $ 4,187,958  
Liabilities:  
Unpaid losses and loss adjustment expenses   $ 2,179,900   $ 2,541,318  
Unearned premiums    193,221    403,708  
Debt    187,566    187,566  
Accounts payable, accrued expenses  
      and other liabilities    254,467    314,830  
Funds held under reinsurance treaties    104,101    262,105  
Dividends to policyholders    6,424    8,479  
Payable under securities loan agreements    96,614    6,285  
      Total liabilities    3,022,293    3,724,291  
Shareholders' Equity:  
Class A Common stock    171,090    171,090  
Additional paid-in capital    109,331    109,331  
Retained earnings    223,519    216,115  
Accumulated other comprehensive income    885    19,622  
Notes receivable from officers    --    (65 )
Treasury stock, at cost    (45,474 )  (52,426 )
Unearned restricted stock compensation    (1,204 )  --  
      Total shareholders' equity    458,147    463,667  
      Total liabilities and shareholders' equity   $ 3,480,440   $ 4,187,958  
Shareholders' equity per share   $ 14.46   $ 14.80  
 



9


PMA Capital Corporation
GAAP Consolidated Statements of Operations
(Unaudited)

         
   Three months ended September 30,  
(in thousands, except per share data)    2004    2003  
Gross premiums written     $ 100,013   $ 352,380  
Net premiums written   $ 83,567   $ 285,283  
Revenues:  
Net premiums earned   $ 104,210   $ 293,482  
Net investment income    13,238    17,167  
Net realized investment gains    3,515    1,392  
Other revenues    4,505    4,147  
      Total revenues    125,468    316,188  
Expenses:  
Losses and loss adjustment expenses    80,706    335,789  
Acquisition expenses    24,087    63,221  
Operating expenses    16,942    23,327  
Dividends to policyholders    805    2,090  
Interest expense    2,973    2,953  
      Total losses and expenses    125,513    427,380  
Pre-tax loss    (45 )  (111,192 )
Income tax expense (benefit):  
      Current    (117 )  (221 )
      Deferred    146    (14,565 )
Total income tax expense (benefit)    29    (14,786 )
Net loss   $ (74 ) $ (96,406 )
Net loss per share:  
Basic   $ --   $ (3.08 )
Diluted   $ --   $ (3.08 )
 



10


PMA Capital Corporation
GAAP Consolidated Statements of Operations
(Unaudited)

         
   Nine months ended September 30,  
(in thousands, except per share data)    2004    2003  
Gross premiums written     $ 282,322   $ 1,133,973  
Net premiums written   $ 244,938   $ 926,797  
Revenues:  
Net premiums earned   $ 428,827   $ 853,174  
Net investment income    44,803    52,592  
Net realized investment gains    14,363    10,198  
Other revenues    14,923    15,913  
      Total revenues    502,916    931,877  
Expenses:  
Losses and loss adjustment expenses    310,367    731,448  
Acquisition expenses    96,290    191,656  
Operating expenses    65,284    71,421  
Dividends to policyholders    3,180    6,180  
Interest expense    8,872    6,936  
      Total losses and expenses    483,993    1,007,641  
Pre-tax income (loss)    18,923    (75,764 )
Income tax expense (benefit):  
      Current    272    --  
      Deferred    6,508    (2,227 )
Total income tax expense (benefit)    6,780    (2,227 )
Net income (loss)   $ 12,143   $ (73,537 )
Net income (loss) per share:  
Basic   $ 0.39   $ (2.35 )
Diluted   $ 0.38   $ (2.35 )
 



11

EX-99 3 ex99-2.txt EXHIBIT 99.2
- --------------------------------------------------------------------------------------------------------------------------- PMA Capital Corporation Statistical Supplement Third Quarter - 2004 - --------------------------------------------------------------------------------------------------------------------------- Table of Contents ----------------- Page Consolidated Highlights: Selected Financial Data - Third Quarter 1 Selected Financial Data - Year-to-date 2 Consolidated Statements of Operations - Per Share Data 3 Consolidated Statements of Operations - Third Quarter 5 Consolidated Statements of Operations - Year-to-date 6 Consolidated Balance Sheets 7 Invested Assets and Net Investment Income; Debt 8 Other Assets and Liabilities; Balance Sheet Impact of Commutations & Novations - Run-off Operations 9 Segment Information: Statements of Operations - Consolidating - Year-to-date 11 - 12 Statements of Operations - Consolidating - Third Quarter 13 - 14 Statements of Operations - PMA Insurance Group 15 Insurance Ratios - PMA Insurance Group 16 Statements of Operations - Run-off Operations 17 Statements of Operations - Corporate & Other 18 Operating Cash Flow Information: Operating Cash Flows - Consolidated 19 Operating Cash Flows - PMA Insurance Group 20 Operating Cash Flows - Run-off Operations 21 Statutory Financial Information: Statutory Surplus; Statutory Financial Information - PMA Pool 22 Other Information: Industry Ratings and Market Information 23 Legend: NM - Not Meaningful NA - Not Applicable Note: Operating income (loss), which we define as GAAP net income (loss) 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 business segments. Accordingly, we report operating income (loss) 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 business segments 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 pages 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 2003 2003 2004 2004 2004 Quarter ------------------------------------------------------------------------ Net Premiums Written by Segment: PMA Insurance Group $ 149,130 $ 140,784 $ 135,286 $ 81,962 $ 97,637 -34.5% Run-off Operations 1 136,381 124,853 23,362 (78,864) (13,884) NM Corporate & Other (228) (180) (150) (225) (186) 18.4% ---------- ---------- ---------- ----------- ---------- ----------- Net premiums written $ 285,283 $ 265,457 $ 158,498 $ 2,873 $ 83,567 -70.7% ========== ========== ========== =========== ========== =========== Major Components of Net Income (Loss): Pre-tax operating income (loss) by segment: PMA Insurance Group $ 7,345 $ (982) $ 6,559 $ 2,809 $ 3,537 -51.8% Run-off Operations 1 (113,701) 11,706 8,946 624 (2,115) 98.1% Corporate & Other (6,228) (6,288) (5,312) (5,506) (4,982) 20.0% ---------- ---------- ---------- ----------- ---------- ----------- Pre-tax operating income (loss) (112,584) 4,436 10,193 (2,073) (3,560) 96.8% Net realized investment gains 1,392 3,582 8,600 2,248 3,515 152.5% ---------- ---------- ---------- ----------- ---------- ----------- Pre-tax income (loss) (111,192) 8,018 18,793 175 (45) 100.0% Income tax expense (benefit) (14,786) 28,050 6,640 111 29 NM ---------- ---------- ---------- ----------- ---------- ----------- Net income (loss) $ (96,406) $ (20,032) $ 12,153 $ 64 $ (74) 99.9% ========== ========== ========== =========== ========== ----------- After-tax operating income (loss) $ (97,311) $ (22,360) $ 6,563 $ (1,397) $ (2,359) 97.6% ========== ========== ========== =========== ========== =========== Diluted Earnings (Loss) Per Share: Net income (loss) $ (3.08) $ (0.64) $ 0.35 $ - $ - 100.0% Less the impact of: Realized gains after tax 0.03 0.07 0.15 0.04 0.08 166.7% ---------- ---------- ---------- ----------- ---------- ----------- After-tax operating income (loss) $ (3.11) $ (0.71) $ 0.20 $ (0.04) $ (0.08) 97.4% ========== ========== ========== =========== ========== =========== Capitalization: Debt $ 186,250 $ 187,566 $ 187,566 $ 187,566 $ 187,566 0.7% Shareholders' equity excluding FAS 115 unrealized gain 465,943 432,284 445,273 443,634 442,797 -5.0% ---------- ---------- ---------- ----------- ---------- ----------- Total capitalization excluding FAS 115 unrealized gain 652,193 619,850 632,839 631,200 630,363 -3.3% FAS 115 unrealized gain 37,830 31,383 40,818 29 15,350 -59.4% ---------- ---------- ---------- ----------- ---------- ----------- Total capitalization including FAS 115 unrealized gain $ 690,023 $ 651,233 $ 673,657 $ 631,229 $ 645,713 -6.4% ========== ========== ========== =========== ========== =========== Book Value Per Share: Excluding FAS 115 unrealized gain $ 14.87 $ 13.80 $ 14.21 $ 14.00 $ 13.98 -6.0% Including FAS 115 unrealized gain $ 16.08 $ 14.80 $ 15.51 $ 14.00 $ 14.46 -10.1% Debt to Total Capital: Excluding FAS 115 unrealized gain 28.6% 30.2% 29.6% 29.7% 29.8% 4.2% Including FAS 115 unrealized gain 27.0% 28.8% 27.8% 29.7% 29.0% 7.4% Interest Coverage: Income before interest and income taxes to interest expense NM NM 7.39 1.06 0.98 NM Operating income before interest and income taxes to interest expense NM NM 4.47 0.30 NM NM 1 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.
1
PMA Capital Corporation Selected Financial Data (Dollar Amounts in Thousands, Except Per Share Data) Nine Nine % Change Months Months Nine 2004 2003 Months ---------------------------------------------- Net Premiums Written by Segment: PMA Insurance Group $ 314,885 $ 462,809 -32.0% Run-off Operations 1 (69,386) 464,596 NM Corporate & Other (561) (608) 7.7% ------------- -------------- -------------- Net premiums written $ 244,938 $ 926,797 -73.6% ============= ============== ============== Major Components of Net Income (Loss): Pre-tax operating income (loss) by segment: PMA Insurance Group $ 12,905 $ 22,523 -42.7% Run-off Operations 1 7,455 (92,082) NM Corporate & Other (15,800) (16,403) 3.7% ------------- -------------- -------------- Pre-tax operating income (loss) 4,560 (85,962) NM Net realized investment gains 14,363 10,198 40.8% ------------- -------------- -------------- Pre-tax income (loss) 18,923 (75,764) NM Income tax expense (benefit) 6,780 (2,227) NM ------------- -------------- -------------- Net income (loss) $ 12,143 $ (73,537) NM ============= ============== ============== After-tax operating income (loss) $ 2,807 $ (80,166) NM ============= ============== ============== Diluted Earnings (Loss) Per Share: Net income (loss) $ 0.38 $ (2.35) NM Less the impact of: Realized gains after tax 0.26 0.21 23.8% ------------- -------------- -------------- After-tax operating income (loss) $ 0.12 $ (2.56) NM ============= ============== ============== 1 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.
2
PMA Capital Corporation Consolidated Statements of Operations - Per Share Data 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2003 2003 2004 2004 2004 2004 2003 ---------------------------------------------------------------------------------------------- Diluted Earnings (Loss) Per Share: Net income (loss) $ (3.08) $ (0.64) $ 0.35 $ - $ - $ 0.38 $ (2.35) =========== =========== =========== =========== =========== =========== =========== Pre-tax operating income (loss) $ (3.59) $ 0.14 $ 0.30 $ (0.07) $ (0.11) $ 0.20 $ (2.74) =========== =========== =========== =========== =========== =========== =========== After-tax operating income (loss) $ (3.11) $ (0.71) $ 0.20 $ (0.04) $ (0.08) $ 0.12 $ (2.56) =========== =========== =========== =========== =========== =========== =========== Diluted weighted average common shares outstanding 31,328,965 31,333,881 36,644,561 31,741,827 31,350,825 36,903,965 31,328,936 =========== =========== =========== =========== =========== =========== =========== - ---------------------------------------------------------------------------------------------------------------------------------- Dividends declared: Class A Common stock $ 0.105 $ - $ - $ - $ - $ - $ 0.315 Actual common shares issued and outstanding 31,329,063 31,334,403 31,334,403 31,692,351 31,681,751 31,681,751 31,329,063 =========== =========== =========== =========== =========== =========== =========== - ---------------------------------------------------------------------------------------------------------------------------------- Class A Common Stock prices: High $ 12.85 $ 14.17 $ 6.66 $ 9.00 $ 8.95 $ 9.00 $ 15.00 Low $ 11.71 $ 3.97 $ 4.78 $ 6.26 $ 5.98 $ 4.78 $ 6.44 Close $ 12.53 $ 5.12 $ 6.07 $ 9.00 $ 7.55 $ 7.55 $ 12.53
3 This Page Intentionally Left Blank
PMA Capital Corporation Consolidated Statements of Operations (In Thousands) 3rd 4th 1st 2nd 3rd % Change Quarter Quarter Quarter Quarter Quarter 3rd 2003 2003 2004 2004 2004 Quarter -------------------------------------------------------------------------- Gross Premiums Written $ 352,380 $ 295,671 $ 157,860 $ 24,449 $ 100,013 -71.6% ========== =========== ========== ========== =========== ========== Net Premiums Written $ 285,283 $ 265,457 $ 158,498 $ 2,873 $ 83,567 -70.7% ========== =========== ========== ========== =========== ========== Revenues: Net premiums earned $293,482 $ 344,991 $206,269 $ 118,348 $ 104,210 -64.5% Net investment income 17,167 16,331 16,758 14,807 13,238 -22.9% Net realized investment gains 1,392 3,582 8,600 2,248 3,515 152.5% Other revenues 4,147 4,466 5,738 4,680 4,505 8.6% ---------- ----------- ---------- ---------- ----------- ---------- Total revenues 316,188 369,370 237,365 140,083 125,468 -60.3% ---------- ----------- ---------- ---------- ----------- ---------- Expenses: Losses and loss adjustment expenses 335,789 266,899 142,190 87,471 80,706 -76.0% Acquisition expenses 63,221 64,790 47,235 24,968 24,087 -61.9% Operating expenses 23,327 32,251 24,779 23,563 16,942 -27.4% Dividends to policyholders 2,090 (5,539) 1,429 946 805 -61.5% Interest expense 2,953 2,951 2,939 2,960 2,973 0.7% ---------- ----------- ---------- ---------- ----------- ---------- Total losses and expenses 427,380 361,352 218,572 139,908 125,513 -70.6% ---------- ----------- ---------- ---------- ----------- ---------- Pre-tax income (loss) (111,192) 8,018 18,793 175 (45) 100.0% ---------- ----------- ---------- ---------- ----------- ---------- Income tax expense (benefit): Current (221) - 325 64 (117) 47.1% Deferred (14,565) 28,050 6,315 47 146 NM ---------- ----------- ---------- ---------- ----------- ---------- Total income tax expense (benefit) (14,786) 28,050 6,640 111 29 NM ---------- ----------- ---------- ---------- ----------- ---------- Net income (loss) $(96,406) $(20,032) $ 12,153 $ 64 $ (74) 99.9% ========== =========== ========== ========== =========== ========== Pre-tax operating income (loss) $(112,584) $ 4,436 $ 10,193 $ (2,073) $ (3,560) 96.8% ========== =========== ========== ========== =========== ========== After-tax operating income (loss) $ (97,311) $(22,360) $ 6,563 $ (1,397) $ (2,359) 97.6% ========== =========== ========== ========== =========== ==========
5
PMA Capital Corporation Consolidated Statements of Operations (In Thousands) Nine Nine % Change Months Months Nine 2004 2003 Months --------------------------------------------- Gross Premiums Written $ 282,322 $ 1,133,973 -75.1% ============= ============= ============ Net Premiums Written $ 244,938 $ 926,797 -73.6% ============= ============= ============ Revenues: Net premiums earned $ 428,827 $ 853,174 -49.7% Net investment income 44,803 52,592 -14.8% Net realized investment gains 14,363 10,198 40.8% Other revenues 14,923 15,913 -6.2% ------------- ------------- ------------ Total revenues 502,916 931,877 -46.0% ------------- ------------- ------------ Expenses: Losses and loss adjustment expenses 310,367 731,448 -57.6% Acquisition expenses 96,290 191,656 -49.8% Operating expenses 65,284 71,421 -8.6% Dividends to policyholders 3,180 6,180 -48.5% Interest expense 8,872 6,936 27.9% ------------- ------------- ------------ Total losses and expenses 483,993 1,007,641 -52.0% ------------- ------------- ------------ Pre-tax income (loss) 18,923 (75,764) NM ------------- ------------- ------------ Income tax expense (benefit): Current 272 - NM Deferred 6,508 (2,227) NM ------------- ------------- ------------ Total income tax expense (benefit) 6,780 (2,227) NM ------------- ------------- ------------ Net income (loss) $ 12,143 $ (73,537) NM ============= ============= ============ Pre-tax operating income (loss) $ 4,560 $ (85,962) NM ============= ============= ============ After-tax operating income (loss) $ 2,807 $ (80,166) NM ============= ============= ============
6
PMA Capital Corporation Consolidated Balance Sheets (In Thousands) 3rd 4th 1st 2nd 3rd Quarter Quarter Quarter Quarter Quarter 2003 2003 2004 2004 2004 ----------------------------------------------------------------------- Assets: Investments in fixed maturities available for sale $ 1,807,977 $ 1,854,555 $ 1,825,076 $ 1,469,027 $ 1,381,788 Short-term investments 187,320 151,332 98,385 88,664 98,761 Short-term investments, loaned securities collateral 113,978 6,300 112,689 129,999 96,606 Cash 34,954 28,963 22,311 66,100 48,046 ------------------------------------------ ------------- ------------ Total investments and cash 2,144,229 2,041,150 2,058,461 1,753,790 1,625,201 Accrued investment income 23,764 20,870 22,820 17,913 16,407 Premiums receivable 379,041 364,125 316,771 249,112 219,111 Reinsurance receivables 1,252,928 1,220,320 1,145,314 1,210,765 1,170,004 Deferred income taxes 93,181 76,962 65,114 88,250 80,541 Deferred acquisition costs 105,089 83,975 71,631 41,321 37,800 Funds held by reinsureds 153,263 124,695 96,147 84,487 111,840 Other assets 255,292 255,861 231,600 248,578 219,536 ------------ ------------- ------------- ------------- ------------ Total assets $ 4,406,787 $ 4,187,958 $ 4,007,858 $ 3,694,216 $ 3,480,440 ============ ============= ============= ============= ============ Liabilities: Unpaid losses and loss adjustment expenses $ 2,486,776 $ 2,541,318 $ 2,438,509 $ 2,292,281 $ 2,179,900 Unearned premiums 490,461 403,708 332,391 216,155 193,221 Debt 186,250 187,566 187,566 187,566 187,566 Accounts payable, accrued expenses and other liabilities 297,028 314,830 282,422 277,457 254,467 Funds held under reinsurance treaties 313,688 262,105 159,913 138,976 104,101 Dividends to policyholders 14,851 8,479 8,292 8,121 6,424 Payable under securities loan agreements 113,960 6,285 112,674 129,997 96,614 ------------ ------------- ------------- ------------- ------------ Total liabilities 3,903,014 3,724,291 3,521,767 3,250,553 3,022,293 ------------ ------------- ------------- ------------- ------------ 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 235,607 216,115 228,268 223,442 223,519 Accumulated other comprehensive income (loss) 40,341 19,622 29,894 (13,160) 885 Notes receivable from officers (64) (65) (66) (59) - Treasury stock, at cost (52,532) (52,426) (52,426) (45,261) (45,474) Unearned restricted stock compensation - - - (1,720) (1,204) ------------ ------------- ------------- ------------- ------------ Total shareholders' equity 503,773 463,667 486,091 443,663 458,147 ------------ ------------- ------------- ------------- ------------ Total liabilities and shareholders' equity $ 4,406,787 $ 4,187,958 $ 4,007,858 $ 3,694,216 $ 3,480,440 ============ ============= ============= ============= ============
7
PMA Capital Corporation Invested Assets and Net Investment Income (Dollars in Thousands) 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2003 2003 2004 2004 2004 2004 2003 --------------------------------------------------------- ---------- ---------- Total Investments & Cash As reported $ 2,144,229 $ 2,041,150 $ 2,058,461 $1,753,790 $ 1,625,201 $ 1,625,201 $ 2,144,229 Less: Securities lending activity 113,960 6,285 112,674 129,997 96,614 96,614 113,960 Unrealized gain 58,200 48,282 62,797 45 23,615 23,615 58,200 ---------- ---------- ----------- ---------- ---------- ---------- ---------- Total adjusted investments & cash $1,972,069 $ 1,986,583 $ 1,882,990 $1,623,748 $ 1,504,972 $ 1,504,972 $ 1,972,069 ========== ========== =========== ========== ========== ========== ========== Net Investment Income As reported $ 17,167 $ 16,331 $ 16,758 $ 14,807 $ 13,238 $ 44,803 $ 52,592 Funds held: Assumed 1,316 (296) (13) 109 73 169 4,292 Ceded (3,551) (3,427) (2,222) (3,962) (2,140) (8,324) (10,977) ---------- ---------- ----------- ---------- ---------- ---------- ---------- Total funds held (2,235) (3,723) (2,235) (3,853) (2,067) (8,155) (6,685) ---------- ---------- ----------- ---------- ---------- ---------- ---------- Total adjusted investment income $ 19,402 $ 20,054 $ 18,993 $ 18,660 $ 15,305 $ 52,958 $ 59,277 ========== ========== =========== ========== ========== ========== ========== Yield As reported 3.15% 3.12% 3.27% 3.11% 3.13% 3.20% 3.42% Investment portfolio 3.95% 4.05% 3.93% 4.10% 3.91% 4.04% 4.19% Duration (in years) 3.9 3.9 3.7 3.4 3.6 3.6 3.9 - -------------------------------------------------------------------------------------------------------------------------
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 Weighted average interest rate on trust preferred debt is 5.92% as of September 30, 2004. 8
PMA Capital Corporation Other Assets and Liabilities (Dollars in Millions) Other Assets 9/30/2004 Other Liabilities 9/30/2004 ------------ --------- ----------------- --------- Deposit assets (FASB #113) $ 49.2 Deposit liabilities (FASB #113) $ 68.9 Return premiums receivable 38.3 Pension liabilities 34.1 Receivables- self-insured & Escrow liabilities 33.1 large deductible clients 29.0 Premium surcharges 31.0 PP&E 27.6 Premium taxes and other assessments 17.1 Escrow 22.5 Accrued postretirement benefits 13.5 Prepaid pension asset 22.3 Accrued commissions 8.4 Other 30.6 Accounts payable and other liabilities 48.4 ------------- --------------- Total: $ 219.5 Total: $ 254.5 ============= ===============
PMA Capital Corporation Balance Sheet Impact of Commutations & Novations - Run-off Operations 1 (Dollars in Thousands) 3rd Quarter 2004 Assets Assumed Ceded Total ------ ------- ----- ----- Reinsurance receivables $ - $ (4,736) $ (4,736) Funds held by reinsureds (5,735) - (5,735) Liabilities ----------- Unpaid loss and loss adjustment expenses $ (46,281) $ - $ (46,281) Unearned premiums (1,157) - (1,157) Funds held under reinsurance treaties (3,777) (4,736) (8,513) Other liabilities (1,408) - (1,408) Nine Months 2004 Assets Assumed Ceded Total ------ ------- ----- ----- Reinsurance receivables $ - $ (63,662) $ (63,662) Funds held by reinsureds (38,002) - (38,002) Other assets 813 (22,170) (21,357) Liabilities ----------- Unpaid loss and loss adjustment expenses $ (202,246) $ - $ (202,246) Unearned premiums (30,015) - (30,015) Funds held under reinsurance treaties (6,514) (75,174) (81,688) Other liabilities (1,408) - (1,408) 1 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.
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PMA Capital Corporation Statements of Operations - Consolidating Nine Months Ended September 30, 2004 (In Thousands) PMA Insurance Corporate Run-off Group & Other1 Operations2 Consolidated ---------------------------------------------------------------------------- Gross Premiums Written $ 350,674 $ (561) $ (67,791) $ 282,322 ================= ================= ================= =================== Net Premiums Written $ 314,885 $ (561) $ (69,386) $ 244,938 ================= ================= ================= =================== Revenues: Net premiums earned $ 352,970 $ (561) $ 76,418 $ 428,827 Net investment income 24,475 888 19,440 44,803 Other revenues 14,604 319 - 14,923 ----------------- ----------------- ----------------- ------------------- Operating revenues 392,049 646 95,858 488,553 ----------------- ----------------- ----------------- ------------------- Losses and Expenses: Losses and loss adjustment expenses 264,897 - 45,470 310,367 Acquisition expenses 67,528 - 28,762 96,290 Operating expenses 43,539 7,574 14,171 65,284 Dividends to policyholders 3,180 - - 3,180 ----------------- ----------------- ----------------- ------------------- Total losses and expenses 379,144 7,574 88,403 475,121 ----------------- ----------------- ----------------- ------------------- Operating income (loss) before income taxes and interest expense 12,905 (6,928) 7,455 13,432 Interest expense - 8,872 - 8,872 ----------------- ----------------- ----------------- ------------------- Pre-tax operating income (loss) $ 12,905 $ (15,800) $ 7,455 4,560 ================= ================= ================= Net realized investment gains 14,363 ------------------- Pre-tax income $ 18,923 =================== 1 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 2 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.
11
PMA Capital Corporation Statements of Operations - Consolidating Nine Months Ended September 30, 2003 (In Thousands) PMA Insurance Corporate Run-off Group & Other (1) Operations (2) Consolidated ---------------------------------------------------------------------------- Gross Premiums Written $ 516,947 $ (608) $ 617,634 $ 1,133,973 ================ ================= ================ ===================== Net Premiums Written $ 462,809 $ (608) $ 464,596 $ 926,797 ================ ================= ================ ===================== Revenues: Net premiums earned $ 392,558 $ (608) $ 461,224 $ 853,174 Net investment income 24,608 1,606 26,378 52,592 Other revenues 13,086 327 2,500 15,913 ---------------- ----------------- ---------------- --------------------- Operating revenues 430,252 1,325 490,102 921,679 ---------------- ----------------- ---------------- --------------------- Losses and Expenses: Losses and loss adjustment expenses 288,433 - 443,015 731,448 Acquisition expenses 66,221 - 125,435 191,656 Operating expenses 46,895 10,792 13,734 71,421 Dividends to policyholders 6,180 - - 6,180 ---------------- ----------------- ---------------- --------------------- Total losses and expenses 407,729 10,792 582,184 1,000,705 ---------------- ----------------- ---------------- --------------------- Operating income (loss) before income taxes and interest expense 22,523 (9,467) (92,082) (79,026) Interest expense - 6,936 - 6,936 ---------------- ----------------- ---------------- --------------------- Pre-tax operating income (loss) $ 22,523 $ (16,403) $ (92,082) (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 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One. 12
PMA Capital Corporation Statements of Operations - Consolidating Three Months Ended September 30, 2004 (In Thousands) PMA Insurance Corporate Run-off Group & Other (1) Operations (2) Consolidated ------------------------------------------------------ Gross Premiums Written $ 109,788 $ (186) $ (9,589) $ 100,013 ========= ========= ========= ========= Net Premiums Written $ 97,637 $ (186) $ (13,884) $ 83,567 ========= ========= ========= ========= Revenues: Net premiums earned $ 103,032 $ (186) $ 1,364 $ 104,210 Net investment income 8,083 271 4,884 13,238 Other revenues 4,480 25 -- 4,505 --------- --------- --------- --------- Operating revenues 115,595 110 6,248 121,953 --------- --------- --------- --------- Losses and Expenses: Losses and loss adjustment expenses 77,994 -- 2,712 80,706 Acquisition expenses 21,876 -- 2,211 24,087 Operating expenses 11,383 2,119 3,440 16,942 Dividends to policyholders 805 -- -- 805 --------- --------- --------- --------- Total losses and expenses 112,058 2,119 8,363 122,540 --------- --------- --------- --------- Operating income (loss) before income taxes and interest expense 3,537 (2,009) (2,115) (587) Interest expense -- 2,973 -- 2,973 --------- --------- --------- --------- Pre-tax operating income (loss) $ 3,537 $ (4,982) $ (2,115) (3,560) ========= ========= ========= Net realized investment gains 3,515 --------- Pre-tax loss $ (45) =========
1 Corporate & Other includes the effect of eliminating transactions between the various Insurance Operations. 2 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One. 13
PMA Capital Corporation Statements of Operations - Consolidating Three Months Ended September 30, 2003 (In Thousands) PMA Insurance Corporate Run-off Group & Other (1) Operations(2) Consolidated ------------------------------------------------------ Gross Premiums Written $ 169,258 $ (228) $ 183,350 $ 352,380 ========= ========= ========= ========= Net Premiums Written $ 149,130 $ (228) $ 136,381 $ 285,283 ========= ========= ========= ========= Revenues: Net premiums earned $ 141,967 $ (228) $ 151,743 $ 293,482 Net investment income 8,134 523 8,510 17,167 Other revenues 4,078 69 -- 4,147 --------- --------- --------- --------- Operating revenues 154,179 364 160,253 314,796 --------- --------- --------- --------- Losses and Expenses: Losses and loss adjustment expenses 105,197 -- 230,592 335,789 Acquisition expenses 23,815 -- 39,406 63,221 Operating expenses 15,732 3,639 3,956 23,327 Dividends to policyholders 2,090 -- -- 2,090 --------- --------- --------- --------- Total losses and expenses 146,834 3,639 273,954 424,427 --------- --------- --------- --------- Operating income (loss) before income taxes and interest expense 7,345 (3,275) (113,701) (109,631) Interest expense -- 2,953 -- 2,953 --------- --------- --------- --------- Pre-tax operating income (loss) $ 7,345 $ (6,228) $(113,701) (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 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One. 14
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 2003 2003 2004 2004 2004 2004 2003 Quarter Months --------------------------------------------------------------------------------------------------- Gross Premiums Written $ 169,258 $ 161,487 $ 146,486 $ 94,400 $ 109,788 $ 350,674 $ 516,947 -35.1% -32.2% ========= ========= ========= ========= ========= ========= ========= ====== ====== Net Premiums Written $ 149,130 $ 140,784 $ 135,286 $ 81,962 $ 97,637 $ 314,885 $ 462,809 -34.5% -32.0% ========= ========= ========= ========= ========= ========= ========= ====== ====== Revenues: Net premiums earned $ 141,967 $ 177,474 $ 131,650 $ 118,288 $ 103,032 $ 352,970 $ 392,558 -27.4% -10.1% Net investment income 8,134 8,299 8,028 8,364 8,083 24,475 24,608 -0.6% -0.5% Other revenues 4,078 4,407 5,735 4,389 4,480 14,604 13,086 9.9% 11.6% --------- --------- --------- --------- --------- --------- --------- ------ ------ Total revenues 154,179 190,180 145,413 131,041 115,595 392,049 430,252 -25.0% -8.9% --------- --------- --------- --------- --------- --------- --------- ------ ------ Losses and Expenses: Losses and loss adjustment expenses 105,197 154,069 98,831 88,072 77,994 264,897 288,433 -25.9% -8.2% Acquisition expenses 23,815 24,354 23,032 22,620 21,876 67,528 66,221 -8.1% 2.0% Operating expenses 15,732 18,278 15,562 16,594 11,383 43,539 46,895 -27.6% -7.2% Dividends to policyholders 2,090 (5,539) 1,429 946 805 3,180 6,180 -61.5% -48.5% --------- --------- --------- --------- --------- --------- --------- ------ ------ Total losses and expenses 146,834 191,162 138,854 128,232 112,058 379,144 407,729 -23.7% -7.0% --------- --------- --------- --------- --------- --------- --------- ------ ------ Pre-tax operating income (loss) $ 7,345 $ (982) $ 6,559 $ 2,809 $ 3,537 $ 12,905 $ 22,523 -51.8% -42.7% ========= ========= ========= ========= ========= ========= ========= ====== ======
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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 2003 2003 2004 2004 2004 2004 2003 Better (Worse) Better (Worse) -------------------------------------------------------------------------------------------------- Ratios - GAAP Basis: Loss and LAE ratio 74.1% 86.8% 75.1% 74.5% 75.7% 75.0% 73.5% (1.6) (1.5) ------- ------- ------- ------- ------- ------- ------- ------- ------- Expense ratio: Acquisition expenses 16.8% 13.7% 17.5% 19.1% 21.2% 19.1% 16.9% (4.4) (2.2) Operating expenses (1) 8.9% 8.2% 9.2% 11.2% 7.8% 9.5% 9.5% 1.1 -- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total expense ratio 25.7% 21.9% 26.7% 30.3% 29.0% 28.6% 26.4% (3.3) (2.2) ------- ------- ------- ------- ------- ------- ------- ------- ------- Policyholders' dividend ratio 1.5% -3.1% 1.1% 0.8% 0.8% 0.9% 1.6% 0.7 0.7 ------- ------- ------- ------- ------- ------- ------- ------- ------- Combined ratio 101.3% 105.6% 102.9% 105.6% 105.5% 104.5% 101.5% (4.2) (3.0) ======= ======= ======= ======= ======= ======= ======= ======= ======= Net investment income ratio -5.7% -4.7% -6.1% -7.1% -7.8% -6.9% -6.3% 2.1 0.6 ------- ------- ------- ------- ------- ------- ------- ------- ------- Operating ratio 95.6% 100.9% 96.8% 98.5% 97.7% 97.6% 95.2% (2.1) (2.4) ======= ======= ======= ======= ======= ======= ======= ======= ======= 1 The operating expense ratio equals insurance-related operating expenses divided by net premiums earned. Insurance-related operating expenses were $12.6 million, $14.5 million, $12.1 million, $13.2 million and $8.1 million for the third and fourth quarters of 2003 and the first, second and third quarters of 2004, 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 2003 2003 2004 2004 2004 2004 2003 Quarter Months -------------------------------------------------------------------------------------------------------- Gross Premiums Written $ 183,350 $ 134,364 $ 11,524 $ (69,726) $ (9,589) $ (67,791) $ 617,634 NM NM ========= ========= ========= ========= ========= ========= ========= ====== ======= Net Premiums Written $ 136,381 $ 124,853 $ 23,362 $ (78,864) $ (13,884) $ (69,386) $ 464,596 NM NM ========= ========= ========= ========= ========= ========= ========= ====== ======= Revenues: Net premiums earned $ 151,743 $ 167,697 $ 74,769 $ 285 $ 1,364 $ 76,418 $ 461,224 -99.1% -83.4% Net investment income 8,510 7,984 8,386 6,170 4,884 19,440 26,378 -42.6% -26.3% Other revenues -- -- -- -- -- -- 2,500 NM -100.0% --------- --------- --------- --------- --------- --------- --------- ------ ------- Total revenues 160,253 175,681 83,155 6,455 6,248 95,858 490,102 -96.1% -80.4% --------- --------- --------- --------- --------- --------- --------- ------ ------- Losses and Expenses: Losses and loss adjustment expenses 230,592 112,830 43,359 (601) 2,712 45,470 443,015 -98.8% -89.7% Acquisition expenses 39,406 40,436 24,203 2,348 2,211 28,762 125,435 -94.4% -77.1% Operating expenses 3,956 10,709 6,647 4,084 3,440 14,171 13,734 -13.0% 3.2% --------- --------- --------- --------- --------- --------- --------- ------ ------- Total losses and expenses 273,954 163,975 74,209 5,831 8,363 88,403 582,184 -96.9% -84.8% --------- --------- --------- --------- --------- --------- --------- ------ ------- Pre-tax operating income (loss) $(113,701) $ 11,706 $ 8,946 $ 624 $ (2,115) $ 7,455 (92,082) 98.1% NM ========= ========= ========= ========= ========= ========= ========= ====== =======
1 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One. 17
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 2003 2003 2004 2004 2004 2004 2003 Quarter Months ------------------------------------------------------------------------------------------------------ Gross Premiums Written $ (228) $ (180) $ (150) $ (225) $ (186) $ (561) $ (608) 18.4% 7.7% ======== ======== ======== ======== ======== ======== ======== ======== ======== Net Premiums Written $ (228) $ (180) $ (150) $ (225) $ (186) $ (561) $ (608) 18.4% 7.7% ======== ======== ======== ======== ======== ======== ======== ======== ======== Revenues: Net premiums earned $ (228) $ (180) $ (150) $ (225) $ (186) $ (561) $ (608) 18.4% 7.7% Net investment income 523 48 344 273 271 888 1,606 -48.2% -44.7% Other revenues 69 59 3 291 25 319 327 63.8% -2.4% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total revenues 364 (73) 197 339 110 646 1,325 69.8% -51.2% -------- -------- -------- -------- -------- -------- -------- -------- -------- Losses and Expenses: Operating expenses 3,639 3,264 2,570 2,885 2,119 7,574 10,792 -41.8% -29.8% -------- -------- -------- -------- -------- -------- -------- -------- -------- Total losses and expenses 3,639 3,264 2,570 2,885 2,119 7,574 10,792 -41.8% -29.8% -------- -------- -------- -------- -------- -------- -------- -------- -------- Operating loss before income taxes and interest expense (3,275) (3,337) (2,373) (2,546) (2,009) (6,928) (9,467) 38.7% 26.8% Interest expense 2,953 2,951 2,939 2,960 2,973 8,872 6,936 0.7% 27.9% -------- -------- -------- -------- -------- -------- -------- -------- -------- Pre-tax operating loss $ (6,228) $ (6,288) $ (5,312) $ (5,506) $ (4,982) $(15,800) (16,403) 20.0% 3.7% ======== ======== ======== ======== ======== ======== ======== ======== ========
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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 2003 2003 2004 2004 2004 2004 2003 ----------------------------------------------------------------------------------------- Receipts: Premiums and other revenues collected $ 319,594 $ 243,436 $ 186,561 $ 103,266 $ 91,121 $ 380,948 $ 987,454 Investment income received 20,079 27,690 22,141 26,520 20,627 69,288 67,621 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total receipts 339,673 271,126 208,702 129,786 111,748 450,236 1,055,075 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 83,436 60,322 6,491 37,839 43,406 87,736 125,528 Losses and LAE paid - prior years 139,352 124,280 217,746 272,164 178,193 668,103 533,589 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total losses and LAE paid 222,788 184,602 224,237 310,003 221,599 755,839 659,117 Insurance operating expenses paid 64,223 68,280 73,845 54,695 43,228 171,768 243,357 Policyholders' dividends paid 2,880 773 1,573 873 2,145 4,591 5,946 Interest on corporate debt 3,582 1,798 3,686 1,856 3,694 9,236 6,568 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total disbursements 293,473 255,453 303,341 367,427 270,666 941,434 914,988 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net other (6,092) 947 (7,511) (22,894) 6,997 (23,408) (7,077) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net operating cash flows $ 40,108 $ 16,620 $ (102,150) $ (260,535) $ (151,921) $ (514,606) $ 133,010 =========== =========== =========== =========== =========== =========== ===========
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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 2003 2003 2004 2004 2004 2004 2003 ------------------------------------------------------------------------------------------ Receipts: Premiums and other revenues collected $ 150,684 $ 147,111 $ 128,216 $ 123,944 $ 97,543 $ 349,703 $ 410,188 Investment income received 9,523 9,433 10,246 9,869 9,574 29,689 28,635 --------- --------- --------- --------- --------- --------- --------- Total receipts 160,207 156,544 138,462 133,813 107,117 379,392 438,823 --------- --------- --------- --------- --------- --------- --------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 37,387 35,923 6,157 19,158 29,827 55,142 66,929 Losses and LAE paid - prior years 57,474 56,739 75,447 63,116 57,160 195,723 200,792 --------- --------- --------- --------- --------- --------- --------- Losses and LAE 94,861 92,662 81,604 82,274 86,987 250,865 267,721 Insurance operating expenses paid 22,578 35,721 52,645 38,931 34,600 126,176 97,004 Policyholders' dividends paid 2,880 773 1,573 873 2,145 4,591 5,946 --------- --------- --------- --------- --------- --------- --------- Total disbursements 120,319 129,156 135,822 122,078 123,732 381,632 370,671 --------- --------- --------- --------- --------- --------- --------- Net other (8,839) (7,150) (8,306) (8,535) 8,102 (8,739) (15,686) --------- --------- --------- --------- --------- --------- --------- Net operating cash flows $ 31,049 $ 20,238 $ (5,666) $ 3,200 $ (8,513) $ (10,979) $ 52,466 ========= ========= ========= ========= ========= ========= =========
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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 2003 2003 2004 2004 2004 2004 2003 ---------------------------------------------------------------------------------------- Receipts: Premiums collected $ 168,910 $ 96,325 $ 58,345 $ (20,678) $ (6,422) $ 31,245 $ 577,266 Investment income received 10,556 18,257 11,895 16,651 11,053 39,599 38,986 --------- --------- --------- --------- --------- --------- --------- Total receipts 179,466 114,582 70,240 (4,027) 4,631 70,844 616,252 --------- --------- --------- --------- --------- --------- --------- Disbursements: Losses and LAE paid: Losses and LAE paid - current year 46,049 24,399 334 18,681 13,579 32,594 58,599 Losses and LAE paid - prior years 81,878 67,541 142,299 209,048 121,033 472,380 332,797 --------- --------- --------- --------- --------- --------- --------- Total losses and LAE paid 127,927 91,940 142,633 227,729 134,612 504,974 391,396 Insurance operating expenses paid 41,645 32,559 21,200 15,764 8,628 45,592 146,353 --------- --------- --------- --------- --------- --------- --------- Total disbursements 169,572 124,499 163,833 243,493 143,240 550,566 537,749 --------- --------- --------- --------- --------- --------- --------- Net other (778) 12,494 1,860 (13,311) 282 (11,169) 8,508 --------- --------- --------- --------- --------- --------- --------- Net operating cash flows $ 9,116 $ 2,577 $ (91,733) $(260,831) $(138,327) $(490,891) $ 87,011 ========= ========= ========= ========= ========= ========= ========= 1 In November 2003 we announced our decision to withdraw from the reinsurance business previously served by our PMA Re operating segment. As a result of this decision, the results of PMA Re are reported as Run-off Operations. Run-off Operations also includes the results of our former excess and surplus lines segment, Caliber One.
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PMA Capital Corporation Statutory Surplus (In Thousands) 3rd 4th 1st 2nd 3rd Quarter Quarter Quarter Quarter Quarter 2003 2003 2004 2004 2004(1) ----------------------------------------------------------------------------------------- PMA Pool(2) $301,684 $296,777 $296,785 $305,074 $ 294,587 (5) PMA Capital Insurance Company(3) 477,391 500,617 517,143 236,247 236,443 (5) PMA Capital Corporation Statutory Financial Information - PMA Pool 2 (In Thousands) 3rd 4th 1st 2nd 3rd Nine Nine Quarter Quarter Quarter Quarter Quarter Months Months 2003 2003 2004 2004 2004 (1) 2004 (1) 2003 ------------------------------------------------------------------------------------------ Net Premiums Written: Workers Compensation & Integrated Disability $ 116,397 $ 77,362 $ 106,190 $ 56,764 $ 88,814 $ 251,768 $ 355,091 Other Commercial Lines 17,424 14,386 11,915 8,275 8,962 29,152 71,593 ---------- --------- ---------- --------- --------- ---------- ---------- Total - PMA Pool $ 133,821 $ 91,748 $ 118,105 $ 65,039 $ 97,776 $ 280,920 $ 426,684 ========== ========= ========== ========= ========= ========== ========== Statutory Ratios: Loss and LAE ratio 74.4% 87.2% 74.9% 75.2% 75.9% 75.3% 73.8% Underwriting expense ratio 24.9% 34.6% 27.1% 39.0% 29.5% 30.7% 24.5% Policyholders' dividend ratio 1.7% -3.4% 1.2% 0.7% 0.4% 0.8% 1.6% ---------- --------- ---------- --------- --------- ---------- ---------- Combined ratio 101.0% 118.4% 103.2% 114.9% 105.8% 106.8% 99.9% ========== ========= ========== ========= ========= ========== ========== Operating ratio 94.9% 113.9% 96.5% 107.4% 98.9% 99.8% 91.9% ========== ========= ========== ========= ========= ========== ==========
1 Estimated. 2 The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company. 3 In November 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 Includes the statutory surplus of the PMA Pool. 5 Includes unassigned surplus of $125.3 million and $42.9 million for the PMA Pool and PMA Capital Insurance Company, respectively. 22
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 (r). 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 10/27/2004): A.M. Best Moody's ----------------------------- -------------------------- PMA Pool (1) B++ (5th of 16) Ba1 (11th of 21) PMA Capital Insurance Company (2) B+ (6th 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 In November 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.
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