8-K

UNITED STATES

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 18, 2009

PMA Capital Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania	001-31706	23-2217932
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

380 Sentry Parkway Blue Bell, Pennsylvania	19422
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:   (610) 397-5298

(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 (see General Instruction A.2. below):

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

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

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

o 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 February 19, 2009, PMA Capital Corporation (the “Registrant”) issued a news release regarding its results for the quarter and year ended December 31, 2008, a copy of which is furnished as Exhibit 99.1 hereto.  Additionally, the Registrant’s Fourth Quarter 2008 Statistical Supplement is furnished as Exhibit 99.2.

The information, including Exhibits 99.1 and 99.2 attached hereto, furnished under this Item 2.02 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 furnished under this Item 2.02 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 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On February 18, 2009, PMA Capital Corporation entered into severance agreements with Anthony J. Ciofani, Executive Vice President and Chief Underwriting Officer of The PMA Insurance Group, and John Santulli, III, Executive Vice President – Risk Services and Sales of The PMA Insurance Group.  The severance agreements provide that each of the executives will be entitled to certain payments and benefits in the event that their employment with the Registrant is terminated.  Events triggering severance payments or the provision of benefits under the agreements are termination by us without cause, termination by the executive with good reason and the death or disability of the executive.

If an executive’s employment is terminated without cause or for good reason, the executive will be entitled to receive a prorated bonus, a severance payment equal to his base salary and target bonus, three months to exercise any vested and unexpired stock options, the prorated portion of any outstanding long-term incentive plan awards, as well as health and welfare benefits and executive job search support.  If a termination without cause or for good reason occurs in anticipation of or within 18 months following a change in control, the benefits that the Registrant is required to provide will increase.

If an executive’s employment is terminated due to death or disability, we will provide him or his estate a prorated target bonus and one year to exercise any unexpired stock options.  In addition, all outstanding equity based awards will vest on the date of termination.

All payments that may become due to an executive under the agreements are conditioned upon the executive executing and delivering a complete release in favor of the Registrant.

A copy of the severance agreements are attached as Exhibits 10.1 and 10.2 to this report and are incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits.

Exhibit 10.1	Severance Agreement between PMA Capital Corporation and Anthony J. Ciofani, dated February 18, 2009
Exhibit 10.2	Severance Agreement between PMA Capital Corporation and John Santulli, III, dated February 18, 2009
Exhibit 99.1	PMA Capital Corporation News Release, dated February 19, 2009
Exhibit 99.2	PMA Capital Corporation Fourth Quarter 2008 Statistical Supplement

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
February 19, 2009	By:	/s/ William E. Hitselberger
	Name:		William E. Hitselberger
	Title:		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
Exhibit 10.1	Severance Agreement between PMA Capital Corporation and Anthony J. Ciofani, dated February 18, 2009
Exhibit 10.2	Severance Agreement between PMA Capital Corporation and John Santulli, III, dated February 18, 2009
Exhibit 99.1	PMA Capital Corporation News Release, dated February 19, 2009
Exhibit 99.2	PMA Capital Corporation Fourth Quarter 2008 Statistical Supplement

EX-10.1

EXHIBIT 10.1

SEVERANCE AGREEMENT

This SEVERANCE AGREEMENT (the "Agreement"), dated as of February 18, 2009 by and between PMA Capital Corporation, a Pennsylvania corporation, and its subsidiaries (the "Company"), and Anthony J. Ciofani (the "Executive").

WITNESSETH THAT

WHEREAS, the Executive is Executive Vice President and Chief Underwriting Officer of the Company or a subsidiary of the Company;

WHEREAS, the Company wishes to encourage the Executive to continue his career and services with the Company or a subsidiary, as the case may be;

WHEREAS, the Company has determined that it is in its best interests and the shareholders' to assure continuity in the management of the Company's and it subsidiaries in the event of a Change in Control by entering into this Agreement with the Executive;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Executive hereby agree as follows:

1.           Term.  This Agreement shall become effective on the Effective Date and shall continue in effect throughout the Term of Employment; provided, however, the restrictive covenants contained in section 9 of this Agreement and, as applicable, the Company's and the Executive's obligations under the other provisions of this Agreement shall survive the Term of Employment and shall continue in effect through the periods provided therein and/or until the Company's and/or the Executive's obligations, as applicable, thereunder are satisfied.

2.           Compensation.  Except as otherwise expressly set forth below, the Executive's compensation shall be determined by, and in the sole discretion of, the Board of Directors of the Company (the "Board") or a committee of the Board.

(a)           Annual Base Salary means the Executive's annual salary in effect on (i) the date of this Agreement, as adjusted from time to time by the Board, (ii) the date in which a Change in Control occurs, or (iii) the date preceding an occurrence which results in the Executive's Good Reason termination of employment, whichever is highest.

(b)           Annual Bonus means the amount awarded to the Executive under the Company's Officer Annual Incentive Compensation Plan (the "Annual Plan") in effect on (i) the date of this Agreement, as adjusted from time to time by the Board, (ii) the date in which a Change in Control occurs, or (iii) the date preceding an occurrence which results in the Executive's Good Reason termination of employment, whichever is highest.

(c)           Long Term Incentive means the amount awarded to the Executive under the Company's Officer Long Term Incentive Compensation Plan in effect on (i) the date of this Agreement, as adjusted from time to time by the Board, (ii) the date on which a Change in Control occurs, or (iii) the date preceding an occurrence which results in the Executive's Good Reason termination of employment, whichever is highest.

(d)           Employee Benefits.  In addition to the foregoing, during the Term of Employment,

(i)           to the extent not duplicative of the specific benefits provided herein, the Executive shall be eligible to participate in all incentive compensation, retirement, supplemental retirement, and deferred compensation plans, policies and arrangements that are provided generally to other executive officers of the Company;

(ii)           the Executive and, as applicable, the Executive's covered dependent(s) shall be eligible to participate in all of the Company's health and welfare benefit plans (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended); and

(iii)           the Executive shall be entitled to receive fringe benefits provided for executive officers of the Company as determined from time to time by the Company.

(e)           Reimbursements.  To the extent required by Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (“409A”), with regard to any provision of this Agreement that provides for the reimbursement of costs and expenses, or for the provision of in-kind benefits:

(i)           the right to such reimbursement or in-kind benefit shall not be subject to liquidation or exchange for another benefit;

(ii)           the amount of expenses or in kind benefits available or paid in one year shall not affect the amount available or paid in any subsequent year; and

(iii)           such payments shall be made on or before the last day of the Executive’s taxable year which follows the year in which the expense occurred.

(f)           Separate Payments.  To the extent permissible by law, each payment and each installment described in this Agreement shall be considered a separate payment from each other payment or installment.

3.           Termination of Employment.

(a)           Termination of Employment and Term of Employment.  The Company or the Executive may terminate the Executive's employment at any time and for any reason in accordance with subsection 3(b) below.  The Term of Employment shall be deemed to have ended on the last day of the Executive's employment.  The Term of Employment shall terminate upon the Executive's death.

2

(b)           Notice of Termination.  Any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with the notice provisions contained in subsection 14(b) below.  For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the Date of Termination and, with respect to a termination due to Disability, Cause or Good Reason, sets forth in reasonable detail the facts and circumstances that are alleged to provide a basis for such termination.  A Notice of Termination from the Company shall specify whether the termination is with or without Cause or due to the Executive's Disability.  A Notice of Termination from the Executive shall specify whether the termination is with or without Good Reason and, if the termination is without Good Reason, whether the termination is due to Executive's Disability.

(c)           Date of Termination.  For purposes of this Agreement, "Date of Termination" shall mean the date specified in the Notice of Termination (but in no event shall such date be earlier than the 30th day following the date the Notice of Termination is given, unless expressly agreed to by the parties hereto or the date of the Executive's death).

(d)           No Waiver.  The failure to set forth any fact or circumstance in a Notice of Termination, which fact or circumstance was not known to the party giving the Notice of Termination when the notice was given, shall not constitute a waiver of the right to assert such fact or circumstance in an attempt to enforce any right under or provision of this Agreement.

(e)           Cause.  For purposes of this Agreement, the term "Cause" shall mean Executive:   commits any act of fraud, embezzlement, theft or commission of a felony in the course of his employment;  engages in knowing and willful misconduct or gross negligence in the performance of his duties;  unlawfully appropriates a corporate opportunity of the Company or its affiliates and subsidiaries; or  knowingly and willfully breaches any of Executive's covenants contained in this Agreement in any material respect.  No act or failure to act directly related to Company action or inaction that constitutes Good Reason shall constitute Cause under this Agreement if the Executive has provided a Notice of Termination based on such Good Reason event prior to the Company's giving of the Notice of Termination for Cause.  The Executive's termination for Cause shall be effective when and if a resolution is duly adopted by an affirmative vote of the Board (less the Executive), stating that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in the Notice of Termination, and such conduct constitutes Cause under this Agreement; provided, however, that the Executive shall have been given the opportunity (i) to cure any act or omission that constitutes Cause if capable of cure and (ii), together with counsel, during the 30-day period following the receipt by the Executive of the Notice of Termination and prior to the adoption of the Board's resolution, to be heard by the Board.

(f)           Disability.  For purposes of this Agreement, the Executive shall be deemed to have a Disability if the Executive is entitled to long-term disability benefits under the Company's long-term disability plan or policy, as the case may be, as in effect on the Date of Termination.

(g)           Good Reason.  For purposes of this Agreement, the term "Good Reason" means the occurrence (without the Executive's express written consent) of any of the following acts or failures to act by the Company:

3

(i) a material reduction in his duties, authority or responsibilities;

(ii) requiring the Executive to be based more than 50 miles away from the Company's headquarters in Blue Bell, Pennsylvania;

(iii) the material breach, and failure to cure, by the Company of any of its other obligations under this Agreement;

(iv) the failure of the Company to obtain the assumption of this Agreement as contemplated in subsection 12(b) hereof; or

(v) any reduction in the Executive's Annual Base Salary or Annual Bonus target that does not affect all similarly situated Executives; provided that any reduction in the Executive's Annual Base Salary or Annual Bonus target shall constitute Good Reason in connection with a Change of Control.

The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder; provided, however, that no such event described above shall constitute Good Reason unless the Executive has given a Notice of Termination to the Company specifying the condition or event relied upon for such termination within 90 days of the occurrence of such event, the Company has failed to cure the condition or event constituting Good Reason within the 30 day period following receipt of the Executive's Notice of Termination, and the Executive’s Termination Date is within six months of the event that constitutes Good Reason.

4.           Obligations of the Company upon Termination.

(a)           Termination by the Company for other than Cause or by the Executive for Good Reason.  If the Executive's employment is terminated by the Company for any reasons other than Cause or Disability or by the Executive for Good Reason:

(i)           The Company shall pay to the Executive, within thirty business days of the Date of Termination, any earned but unpaid Annual Base Salary;

(ii)           The Company shall pay to the Executive, within thirty business days of the Date of Termination, a prorated Annual Bonus which is the product of (A) the target Annual Bonus opportunity in the year in which the Date of Termination occurs or the prior year if no target Annual Bonus opportunity has yet been determined, (B) the average payout factor of the Annual Plan for the prior three years, and (C) the fraction of the year the Executive was employed.

(iii)           Upon the execution and non-rescission of the release noted in Section 6, the Company shall commence to pay as of the next regular Company payroll to the Executive, in accordance with the Company's regular payroll practice for its executive officers, payments equal to the sum of 100% of (A) the Executive's Annual Base Salary, less any applicable deductions for taxes and/or benefits, and (B) the product of (I) the Executive's target Annual Bonus opportunity for the year in which the Date of Termination occurs or the prior year if no target Annual Bonus opportunity has yet been determined and (II) the average payout factor of the Annual Plan for the prior three years;

4

(iv)           For a one (1) year period after the Date of Termination, the Company will arrange to provide the Executive (and any covered dependents), with life, accident and health insurance benefits substantially similar to those the Executive and any covered dependents were receiving immediately prior to the Notice of Termination, except for any such benefits that were waived by the Executive in writing.  Nothing in this subsection 4(a)(iv) will affect the Executive's right to elect COBRA continuation coverage in accordance with applicable law or extend the COBRA continuation coverage period; and

(v)           The Executive shall have at least three (3) months (or until the last day of the stock option term or the tenth anniversary of the date of the grant; whichever occurs first) to exercise any then vested outstanding stock options.  Executive's outstanding Long Term Incentive awards shall be deemed earned as set forth in the original award, except that the amount earned shall be prorated based on a fraction, the numerator of which is the number of full months Executive was employed during the performance period of such award and the denominator of which is the number of months in such performance period.  Such awards will be payable under the terms set forth in the award.  All of the Executive's other unvested equity-based awards shall be forfeited.

(vi)           The Company agrees to engage the services, on Executive's behalf and at the Company's expense, the services of an outplacement company, who will assist Executive with job search support.  Services will be available for one year following the Date of Termination.

(b)           Termination in Connection with a Change in Control.

If, in anticipation of or within the 18 month period following a Change in Control (as defined below), the Executive's employment is terminated by the Company for any reason other than Cause or Disability or by the Executive for Good Reason, the Executive shall receive the payments and benefits described in subsection 4(a), except that

(i)           the payment described in section 4(a)(iii) shall be equal to 150% of the amounts described in (A) and (B) thereof,

(ii)           all of the Executive's Long Term Incentive awards shall be paid as if 100% of the performance target(s) had been attained and shall be payable within two and one half (2.5) months from the Date of Termination;

(iii)           all of the Executive's other outstanding equity-based awards shall become fully vested on the Date of Termination; and

(iv)           the continuation period described in section 4(a)(iv) shall be for one and one half (1.5) years.

For purposes of this Agreement, a "Section 409A Change in Control" is a "Change in Control" as set forth in paragraph 9(b) of the PMA Capital Corporation 2007 Omnibus Incentive Compensation Plan that is also a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as described in Section 409A(2)(A)(v) of the Code and the Treasury regulations promulgated thereunder; or the approval by the shareholders of a plan or proposal for the liquidation or dissolution of the Company.

5

(c)           Termination by the Company for Cause or by the Executive without Good Reason.  If the Executive's employment is terminated by the Company for Cause, the Company shall pay to the Executive, within thirty business days of the Date of Termination, any earned but unpaid Annual Base Salary and all outstanding stock options (whether or not then exercisable) and all of the Executive's unvested equity-based and other incentive awards shall be forfeited as of the Date of Termination.  If the Executive's employment is terminated by the Executive without Good Reason (and not due to death, Disability or retirement), the Company shall pay to the Executive, within thirty business days of the Date of Termination, any earned but unpaid Annual Base Salary, the Executive shall have three months (or until the last day of the stock option term, whichever occurs first) to exercise any outstanding vested stock options and all of the Executive's unvested equity-based awards shall be forfeited as of the Date of Termination.

(d)           Termination due to Death or Disability.  If the Executive's employment is terminated due: to death or Disability,  the Company shall pay to the Executive (or to the Executive's estate or personal representative in the case of the Executive's death), within thirty business days after the Date of Termination, (A) any earned but unpaid Annual Base Salary and (B) a prorated Annual Bonus which is the product of (I) the target Annual Bonus opportunity in the year in which the Date of Termination occurs or the prior year if no target Annual Bonus opportunity has yet been determined, (II) the average payout factor of the Annual Plan for the prior three years, and (III) the fraction of the year the Executive was employed, and  all of the Executive's outstanding equity-based awards shall vest on the Date of Termination and the Executive's outstanding stock options shall remain exercisable for one year following the Date of Termination (or until the last day of the stock option term, whichever occurs first).

(e)           Specified Employee.  To the extent necessary to avoid adverse tax consequences, and except as described below, any payment to which the Executive becomes entitled under the Agreement, or any arrangement or plan referenced in this Agreement, that constitutes “deferred compensation” under 409A, and is payable upon the Executives termination at a time when the Executive is a “specified employee” as defined by 409A shall not be made until the earliest of:

(i)           the expiration of the six month period (the “Deferral Period”) measured from the date of the Executive’s ‘separation from service’ under 409A; or

(ii)           the date of the Executive’s death.

Upon the expiration of the Deferral Period, all payments that would have been made during the Deferral Period (whether in a single lump sum or in installments) shall be paid as a single lump sum to the Executive or, if applicable, his beneficiary.  This section shall not apply to any payment which constitutes “separation pay” as described in Internal Revenue Regulations Section 409A-1(b)(9) (in general, payments (i) that are made on an involuntary separation from service which (ii) do not exceed the lesser of two times (x) the Executive’s annualized compensation for the taxable year preceding the year in which the separation from service occurs or (y) the Code Section 401(a)(17) limit on compensation for the year in which separation from service occurs and (iii) are paid in total by the end of the second calendar year following the calendar year in which the separation from service occurs).

6

5.           Certain Tax Consequences.  If the payments and benefits provided for in this Agreement constitute "parachute payments" within the meaning of the Code, and but for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code, then the payments and benefits under this Agreement will be payable as described below:

(a)           if the excise tax would be avoided by reducing the payments and/or benefits by 10% or less, the payments and/or benefits will be reduced to the extent necessary so that the excise tax is not applicable;

(b)           if the tax provisions would not be avoided by reducing the payments and/or benefits by 10% or less, an excise tax gross-up payment will be made to the Executive in an amount so that after payment of income, employment and any other taxes imposed on the gross-up payment (including the 20% excise tax under Section 4999), the Executive would retain an amount equal to the 20% excise tax imposed on the change in control related payments and benefits.  The gross-up payment is intended to put the Executive in the same after tax position he or she would have been in had the excise tax not been imposed.  The excise tax gross up payment shall be paid in the taxable year in which the Executive pays the 20% excise tax pursuant to Section 4999 of the Code.

6.           Release.  Notwithstanding any provision herein to the contrary, the Company will require that, prior to payment of any amount under section 4 of this Agreement (other than due to the Executive's death), the Executive shall have executed a complete release of the Company and  its affiliates and related parties in such form as is reasonably required by the Company.  Notwithstanding the foregoing, the Executive shall not be required to release any rights to indemnification or insurance coverage to which he/she was entitled as an officer of the Company or its affiliates.

7.           Non-Exclusivity of Rights.  Except as otherwise provided in this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies for which the Executive may qualify (other than severance policies).  Vested benefits and other amounts that the Executive is otherwise entitled to receive under any other plan, program, policy, or practice of, or any contract or agreement with, the Company or any of its affiliated companies on or after the Date of Termination shall be payable in accordance with the terms of each such plan, program, policy, practice, contract or agreement, as the case may be, except as expressly modified by this Agreement.

8.           Full Settlement.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as otherwise provided in subsections 4(a)(iv), 5 and 14(e), the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

7

9.           Confidential Information; Non-Solicitation, Non-Interference and Non-Disparagement.

(a)           Confidential Information.  The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge, trade secrets, methods, know-how or data relating to the Company or its affiliates and their businesses or acquisition prospects that the Executive obtained or obtains during the Executive's employment by the Company ("Confidential Information"), provided that "Confidential Information" shall not include any secret or confidential information, knowledge, trade secrets, methods, know-how or data that is or becomes generally known to the public (other than as a result of the Executive's violation of this section 9).  Except as may be required and appropriate in connection with carrying out his duties under this Agreement, the Executive shall not communicate, divulge, or disseminate any material Confidential Information at any time during or after the Executive's employment with the Company, except with the prior written consent of the Company or as otherwise required by law or legal process; provided, however, that if so required, the Executive will provide the Company with reasonable notice to contest such disclosure.

(b)           Non-Solicitation.  During the Term of Employment and for the one (1) year period following the Date of Termination for any reason, the Executive will not, directly or indirectly, initiate any action to solicit or recruit anyone who is then an employee of the Company for the purpose of being employed by him or by any business, individual, partnership, firm, corporation or other entity on whose behalf Executive is acting as an agent, representative, employee or otherwise.

(c)           Non-Interference with Customers or Producers.  During the Term of Employment and for the one (1) year period following the Date of Termination for any reason, the Executive will not interfere with any business relationship between the Company and any of its customers or agents or brokers that produce business for the Company.

(d)           Non-Disparagement.  The parties agree that their professional and personal reputations are important and should not be impaired by either party after this Agreement is executed.  Executive therefore agrees not to disparage the professional or personal reputation of the Company, its officers, shareholders, directors, or management, and the Company agrees that it will not disparage Executive's professional or personal reputation.

(e)           Remedies; Severability.

(i)           The parties acknowledge that money damages will not afford an adequate remedy for a breach or threat to breach any provision of subsections 9(a) through (d).  Therefore, if a party violates or threatens to violate the provisions of subsections 9(a) through (d), in whole or in part, the other party shall be entitled to specific performance and injunctive relief, without prejudice to other remedies that it may have at law or in equity.

(ii)           If any term or provision of this section 9, or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this section 9, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this section 9 shall be valid and enforceable to the fullest extent permitted by law.  Moreover, if a court of competent jurisdiction deems any provision of subsections 9(a) through (d) to be too broad in time, scope, or area, it is expressly agreed that such provision shall be reformed to the maximum degree that would not render it unenforceable.

8

10.           Attorneys' Fees.  Each party shall pay its own legal fees, court costs, litigation expenses and/or arbitration expenses (as applicable) in connection with any dispute, litigation or arbitration regarding the validity or enforceability of, or liability under or otherwise involving any provision of this Agreement, except that if the Executive prevails on the majority of material claims disputed, the Company shall pay all reasonable legal fees, court cost, litigation expenses and/or arbitration expenses.

11.           Indemnification.  The Executive shall be indemnified by the Company for actions taken in his position as an officer, director, employee and agent of the Company to the greatest extent permitted by applicable law.  The Executive shall also be covered as an insured by a liability insurance policy secured by and maintained by the Company covering acts of its and its affiliates' officers and members of the Board.

12.           Successors.

(a)           Assignment of Agreement.  This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.

(b)           Successors of the Company.  No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor that executes and delivers the agreement provided for in this section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

13.           Arbitration.  Except for matters covered under section 9, in the event of any dispute or difference between the Company and the Executive with respect to the subject matter of this Agreement and the enforcement of rights hereunder, either the Executive or the Company may, by written notice to the other, require such dispute or difference to be submitted to arbitration.  The arbitrator or arbitrators shall be selected by agreement of the parties or, if they cannot agree on an arbitrator or arbitrators within 30 days after the date arbitration is required by either party, then the arbitrator or arbitrators shall be selected by the American Arbitration Association upon the application of the Executive or the Company.  The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute.  Execution of the determination by such arbitrator may be sought in any court of competent jurisdiction.  The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation.  Unless otherwise agreed by the parties, any such arbitration shall take place in Philadelphia, Pennsylvania.

9

14.           Miscellaneous.

(a)           Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania without reference to principles of conflict of laws.

(b)           Notices.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery, email or by facsimile (provided confirmation of receipt of such facsimile is received) to the other party or by registered or certified mail, return receipt requested, postage prepaid, or by Federal Express or other nationally-recognized overnight courier that requires signatures of recipients upon delivery and provides tracking services, addressed as follows:

If to the Executive:

If to the Company:

PMA Capital Corporation

380 Sentry Parkway

Blue Bell, PA  19422

Attention:  General Counsel

Facsimile:  610-397-5144

or to such other address as either party furnishes to the other in writing in accordance with this subsection 14(b).  Notices and communications shall be effective when actually received by the addressee.

(c)           Amendment.  This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(d)           Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.  If any provision of this Agreement shall be held invalid or unenforceable in part and if the rights and obligations of any to this Agreement will not be materially and adversely affected thereby, the remaining portion of such provision, together with all other provisions of this Agreement, shallremain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.

10

(e)           Withholding.  Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local, and foreign taxes that are required to be withheld by applicable laws or regulations.

(f)           Waiver.  The Executive's or the Company's failure to insist upon strict compliance with any provision of, or to assert any right under, this Agreement (including, without limitation, the right of the Executive to terminate employment for Good Reason) shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Agreement.

(g)           Entire Understanding; Counterparts.  The Executive and the Company acknowledge that this Agreement supersedes and terminates any other severance and/or employment agreements between the Executive and the Company or any Company affiliates.  This Agreement may be executed in several counterparts, each of which shall be deemed an original and said counterparts shall constitute but one and the same instrument.

(h)           Rights and Benefits Unsecured.  The rights and benefits of the Executive under this Agreement may not be anticipated, assigned, alienated, or subject to attachment, garnishment, levy; execution, or other legal or equitable process except as required by law.  Any attempts by the Executive to anticipate, alienate, assign, sell, transfer, pledge or encumber the same shall be void.  Payments hereunder shall not be considered assets of the Executive in the event of insolvency or bankruptcy.

(i)           Noncontravention.  The Company represents that the Company is not prevented from entering into, or performing this Agreement by the terms of any law, order, rule or regulation, its by-laws or declaration of trust, or any agreement to which it is a party.

(j)           Section and Subsection Headings.  The section and subsection headings in this Agreement are for convenience of reference only; they form no part of this Agreement and shall not affect its interpretation.

11

IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization of the Board, the Company has caused this Agreement to be executed, all as of the day and year first above written.

PMA CAPITAL CORPORATION; PENNSYLVANIA MANUFACTURERS
ASSOCIATION INSURANCE COMPANY;
MANUFACTURERS ALLIANCE INSURANCE
COMPANY; PENNSYLVANIA
MANUFACTURERS INDEMNITY COMPANY;
AND PMA MANAGEMENT CORP.
By:	/s/ Vincent T. Donnelly
	Name:	Vincent T. Donnelly
	Title:	President and Chief Executive Officer
	Date:	February 18, 2009
EXECUTIVE
/s/ Anthony J. Ciofani
Name:	Anthony J. Ciofani
Date:	February 18, 2009

12

EX-10.2

EXHIBIT 10.2

SEVERANCE AGREEMENT

This SEVERANCE AGREEMENT (the "Agreement"), dated as of February 18, 2009 is by and between PMA Capital Corporation, a Pennsylvania corporation, and its subsidiaries (the "Company"), and John Santulli, III (the "Executive").

WITNESSETH THAT

WHEREAS, the Executive is Executive Vice President – Risk Services and Sales of the Company or a subsidiary of the Company;

WHEREAS, the Company wishes to encourage the Executive to continue his career and services with the Company or a subsidiary, as the case may be;

WHEREAS, the Company has determined that it is in its best interests and the shareholders' to assure continuity in the management of the Company's and it subsidiaries in the event of a Change in Control by entering into this Agreement with the Executive;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Executive hereby agree as follows:

1.           Term.  This Agreement shall become effective on the Effective Date and shall continue in effect throughout the Term of Employment; provided, however, the restrictive covenants contained in section 9 of this Agreement and, as applicable, the Company's and the Executive's obligations under the other provisions of this Agreement shall survive the Term of Employment and shall continue in effect through the periods provided therein and/or until the Company's and/or the Executive's obligations, as applicable, thereunder are satisfied.

2.           Compensation.  Except as otherwise expressly set forth below, the Executive's compensation shall be determined by, and in the sole discretion of, the Board of Directors of the Company (the "Board") or a committee of the Board.

(a)           Annual Base Salary means the Executive's annual salary in effect on (i) the date of this Agreement, as adjusted from time to time by the Board, (ii) the date in which a Change in Control occurs, or (iii) the date preceding an occurrence which results in the Executive's Good Reason termination of employment, whichever is highest.

(b)           Annual Bonus means the amount awarded to the Executive under the Company's Officer Annual Incentive Compensation Plan (the "Annual Plan") in effect on (i) the date of this Agreement, as adjusted from time to time by the Board, (ii) the date in which a Change in Control occurs, or (iii) the date preceding an occurrence which results in the Executive's Good Reason termination of employment, whichever is highest.

(c)           Long Term Incentive means the amount awarded to the Executive under the Company's Officer Long Term Incentive Compensation Plan in effect on (i) the date of this Agreement, as adjusted from time to time by the Board, (ii) the date on which a Change in Control occurs, or (iii) the date preceding an occurrence which results in the Executive's Good Reason termination of employment, whichever is highest.

(d)           Employee Benefits.  In addition to the foregoing, during the Term of Employment,

(i)           to the extent not duplicative of the specific benefits provided herein, the Executive shall be eligible to participate in all incentive compensation, retirement, supplemental retirement, and deferred compensation plans, policies and arrangements that are provided generally to other executive officers of the Company;

(ii)           the Executive and, as applicable, the Executive's covered dependent(s) shall be eligible to participate in all of the Company's health and welfare benefit plans (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended); and

(iii)           the Executive shall be entitled to receive fringe benefits provided for executive officers of the Company as determined from time to time by the Company.

(e)           Reimbursements.  To the extent required by Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (“409A”), with regard to any provision of this Agreement that provides for the reimbursement of costs and expenses, or for the provision of in-kind benefits:

(i)           the right to such reimbursement or in-kind benefit shall not be subject to liquidation or exchange for another benefit;

(ii)           the amount of expenses or in kind benefits available or paid in one year shall not affect the amount available or paid in any subsequent year; and

(iii)           such payments shall be made on or before the last day of the Executive’s taxable year which follows the year in which the expense occurred.

(f)           Separate Payments.  To the extent permissible by law, each payment and each installment described in this Agreement shall be considered a separate payment from each other payment or installment.

3.           Termination of Employment.

(a)           Termination of Employment and Term of Employment.  The Company or the Executive may terminate the Executive's employment at any time and for any reason in accordance with subsection 3(b) below.  The Term of Employment shall be deemed to have ended on the last day of the Executive's employment.  The Term of Employment shall terminate upon the Executive's death.

2

(b)           Notice of Termination.  Any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with the notice provisions contained in subsection 14(b) below.  For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the Date of Termination and, with respect to a termination due to Disability, Cause or Good Reason, sets forth in reasonable detail the facts and circumstances that are alleged to provide a basis for such termination.  A Notice of Termination from the Company shall specify whether the termination is with or without Cause or due to the Executive's Disability.  A Notice of Termination from the Executive shall specify whether the termination is with or without Good Reason and, if the termination is without Good Reason, whether the termination is due to Executive's Disability.

(c)           Date of Termination.  For purposes of this Agreement, "Date of Termination" shall mean the date specified in the Notice of Termination (but in no event shall such date be earlier than the 30th day following the date the Notice of Termination is given, unless expressly agreed to by the parties hereto or the date of the Executive's death).

(d)           No Waiver.  The failure to set forth any fact or circumstance in a Notice of Termination, which fact or circumstance was not known to the party giving the Notice of Termination when the notice was given, shall not constitute a waiver of the right to assert such fact or circumstance in an attempt to enforce any right under or provision of this Agreement.

(e)           Cause.  For purposes of this Agreement, the term "Cause" shall mean Executive:   commits any act of fraud, embezzlement, theft or commission of a felony in the course of his employment;  engages in knowing and willful misconduct or gross negligence in the performance of his duties;  unlawfully appropriates a corporate opportunity of the Company or its affiliates and subsidiaries; or  knowingly and willfully breaches any of Executive's covenants contained in this Agreement in any material respect.  No act or failure to act directly related to Company action or inaction that constitutes Good Reason shall constitute Cause under this Agreement if the Executive has provided a Notice of Termination based on such Good Reason event prior to the Company's giving of the Notice of Termination for Cause.  The Executive's termination for Cause shall be effective when and if a resolution is duly adopted by an affirmative vote of the Board (less the Executive), stating that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in the Notice of Termination, and such conduct constitutes Cause under this Agreement; provided, however, that the Executive shall have been given the opportunity (i) to cure any act or omission that constitutes Cause if capable of cure and (ii), together with counsel, during the 30-day period following the receipt by the Executive of the Notice of Termination and prior to the adoption of the Board's resolution, to be heard by the Board.

(f)           Disability.  For purposes of this Agreement, the Executive shall be deemed to have a Disability if the Executive is entitled to long-term disability benefits under the Company's long-term disability plan or policy, as the case may be, as in effect on the Date of Termination.

(g)           Good Reason.  For purposes of this Agreement, the term "Good Reason" means the occurrence (without the Executive's express written consent) of any of the following acts or failures to act by the Company:

3

(i) a material reduction in his duties, authority or responsibilities;

(ii) requiring the Executive to be based more than 50 miles away from the Company's headquarters in Blue Bell, Pennsylvania;

(iii) the material breach, and failure to cure, by the Company of any of its other obligations under this Agreement;

(iv) the failure of the Company to obtain the assumption of this Agreement as contemplated in subsection 12(b) hereof; or

(v) any reduction in the Executive's Annual Base Salary or Annual Bonus target that does not affect all similarly situated Executives; provided that any reduction in the Executive's Annual Base Salary or Annual Bonus target shall constitute Good Reason in connection with a Change of Control.

The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder; provided, however, that no such event described above shall constitute Good Reason unless the Executive has given a Notice of Termination to the Company specifying the condition or event relied upon for such termination within 90 days of the occurrence of such event, the Company has failed to cure the condition or event constituting Good Reason within the 30 day period following receipt of the Executive's Notice of Termination, and the Executive’s Termination Date is within six months of the event that constitutes Good Reason.

4.           Obligations of the Company upon Termination.

(a)           Termination by the Company for other than Cause or by the Executive for Good Reason.  If the Executive's employment is terminated by the Company for any reasons other than Cause or Disability or by the Executive for Good Reason:

(i)           The Company shall pay to the Executive, within thirty business days of the Date of Termination, any earned but unpaid Annual Base Salary;

(ii)           The Company shall pay to the Executive, within thirty business days of the Date of Termination, a prorated Annual Bonus which is the product of (A) the target Annual Bonus opportunity in the year in which the Date of Termination occurs or the prior year if no target Annual Bonus opportunity has yet been determined, (B) the average payout factor of the Annual Plan for the prior three years, and (C) the fraction of the year the Executive was employed.

(iii)           Upon the execution and non-rescission of the release noted in Section 6, the Company shall commence to pay as of the next regular Company payroll to the Executive, in accordance with the Company's regular payroll practice for its executive officers, payments equal to the sum of 100% of (A) the Executive's Annual Base Salary, less any applicable deductions for taxes and/or benefits, and (B) the product of (I) the Executive's target Annual Bonus opportunity for the year in which the Date of Termination occurs or the prior year if no target Annual Bonus opportunity has yet been determined and (II) the average payout factor of the Annual Plan for the prior three years;

4

(iv)           For a one (1) year period after the Date of Termination, the Company will arrange to provide the Executive (and any covered dependents), with life, accident and health insurance benefits substantially similar to those the Executive and any covered dependents were receiving immediately prior to the Notice of Termination, except for any such benefits that were waived by the Executive in writing.  Nothing in this subsection 4(a)(iv) will affect the Executive's right to elect COBRA continuation coverage in accordance with applicable law or extend the COBRA continuation coverage period; and

(v)           The Executive shall have at least three (3) months (or until the last day of the stock option term or the tenth anniversary of the date of the grant; whichever occurs first) to exercise any then vested outstanding stock options.  Executive's outstanding Long Term Incentive awards shall be deemed earned as set forth in the original award, except that the amount earned shall be prorated based on a fraction, the numerator of which is the number of full months Executive was employed during the performance period of such award and the denominator of which is the number of months in such performance period.  Such awards will be payable under the terms set forth in the award.  All of the Executive's other unvested equity-based awards shall be forfeited.

(vi)           The Company agrees to engage the services, on Executive's behalf and at the Company's expense, the services of an outplacement company, who will assist Executive with job search support.  Services will be available for one year following the Date of Termination.

(b)           Termination in Connection with a Change in Control.

If, in anticipation of or within the 18 month period following a Change in Control (as defined below), the Executive's employment is terminated by the Company for any reason other than Cause or Disability or by the Executive for Good Reason, the Executive shall receive the payments and benefits described in subsection 4(a), except that

(i)           the payment described in section 4(a)(iii) shall be equal to 150% of the amounts described in (A) and (B) thereof,

(ii)           all of the Executive's Long Term Incentive awards shall be paid as if 100% of the performance target(s) had been attained and shall be payable within two and one half (2.5) months from the Date of Termination;

(iii)           all of the Executive's other outstanding equity-based awards shall become fully vested on the Date of Termination; and

(iv)           the continuation period described in section 4(a)(iv) shall be for one and one half (1.5) years.

For purposes of this Agreement, a "Section 409A Change in Control" is a "Change in Control" as set forth in paragraph 9(b) of the PMA Capital Corporation 2007 Omnibus Incentive Compensation Plan that is also a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as described in Section 409A(2)(A)(v) of the Code and the Treasury regulations promulgated thereunder; or the approval by the shareholders of a plan or proposal for the liquidation or dissolution of the Company.

5

(c)           Termination by the Company for Cause or by the Executive without Good Reason.  If the Executive's employment is terminated by the Company for Cause, the Company shall pay to the Executive, within thirty business days of the Date of Termination, any earned but unpaid Annual Base Salary and all outstanding stock options (whether or not then exercisable) and all of the Executive's unvested equity-based and other incentive awards shall be forfeited as of the Date of Termination.  If the Executive's employment is terminated by the Executive without Good Reason (and not due to death, Disability or retirement), the Company shall pay to the Executive, within thirty business days of the Date of Termination, any earned but unpaid Annual Base Salary, the Executive shall have three months (or until the last day of the stock option term, whichever occurs first) to exercise any outstanding vested stock options and all of the Executive's unvested equity-based awards shall be forfeited as of the Date of Termination.

(d)           Termination due to Death or Disability.  If the Executive's employment is terminated due: to death or Disability,  the Company shall pay to the Executive (or to the Executive's estate or personal representative in the case of the Executive's death), within thirty business days after the Date of Termination, (A) any earned but unpaid Annual Base Salary and (B) a prorated Annual Bonus which is the product of (I) the target Annual Bonus opportunity in the year in which the Date of Termination occurs or the prior year if no target Annual Bonus opportunity has yet been determined, (II) the average payout factor of the Annual Plan for the prior three years, and (III) the fraction of the year the Executive was employed, and  all of the Executive's outstanding equity-based awards shall vest on the Date of Termination and the Executive's outstanding stock options shall remain exercisable for one year following the Date of Termination (or until the last day of the stock option term, whichever occurs first).

(e)           Specified Employee.  To the extent necessary to avoid adverse tax consequences, and except as described below, any payment to which the Executive becomes entitled under the Agreement, or any arrangement or plan referenced in this Agreement, that constitutes “deferred compensation” under 409A, and is payable upon the Executives termination at a time when the Executive is a “specified employee” as defined by 409A shall not be made until the earliest of:

(i)           the expiration of the six month period (the “Deferral Period”) measured from the date of the Executive’s ‘separation from service’ under 409A; or

(ii)           the date of the Executive’s death.

Upon the expiration of the Deferral Period, all payments that would have been made during the Deferral Period (whether in a single lump sum or in installments) shall be paid as a single lump sum to the Executive or, if applicable, his beneficiary.  This section shall not apply to any payment which constitutes “separation pay” as described in Internal Revenue Regulations Section 409A-1(b)(9) (in general, payments (i) that are made on an involuntary separation from service which (ii) do not exceed the lesser of two times (x) the Executive’s annualized compensation for the taxable year preceding the year in which the separation from service occurs or (y) the Code Section 401(a)(17) limit on compensation for the year in which separation from service occurs and (iii) are paid in total by the end of the second calendar year following the calendar year in which the separation from service occurs).

6

5.           Certain Tax Consequences.  If the payments and benefits provided for in this Agreement constitute "parachute payments" within the meaning of the Code, and but for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code, then the payments and benefits under this Agreement will be payable as described below:

(a)           if the excise tax would be avoided by reducing the payments and/or benefits by 10% or less, the payments and/or benefits will be reduced to the extent necessary so that the excise tax is not applicable;

(b)           if the tax provisions would not be avoided by reducing the payments and/or benefits by 10% or less, an excise tax gross-up payment will be made to the Executive in an amount so that after payment of income, employment and any other taxes imposed on the gross-up payment (including the 20% excise tax under Section 4999), the Executive would retain an amount equal to the 20% excise tax imposed on the change in control related payments and benefits.  The gross-up payment is intended to put the Executive in the same after tax position he or she would have been in had the excise tax not been imposed.  The excise tax gross up payment shall be paid in the taxable year in which the Executive pays the 20% excise tax pursuant to Section 4999 of the Code.

6.           Release.  Notwithstanding any provision herein to the contrary, the Company will require that, prior to payment of any amount under section 4 of this Agreement (other than due to the Executive's death), the Executive shall have executed a complete release of the Company and  its affiliates and related parties in such form as is reasonably required by the Company.  Notwithstanding the foregoing, the Executive shall not be required to release any rights to indemnification or insurance coverage to which he/she was entitled as an officer of the Company or its affiliates.

7.           Non-Exclusivity of Rights.  Except as otherwise provided in this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies for which the Executive may qualify (other than severance policies).  Vested benefits and other amounts that the Executive is otherwise entitled to receive under any other plan, program, policy, or practice of, or any contract or agreement with, the Company or any of its affiliated companies on or after the Date of Termination shall be payable in accordance with the terms of each such plan, program, policy, practice, contract or agreement, as the case may be, except as expressly modified by this Agreement.

8.           Full Settlement.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as otherwise provided in subsections 4(a)(iv), 5 and 14(e), the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

7

9.           Confidential Information; Non-Solicitation, Non-Interference and Non-Disparagement.

(a)           Confidential Information.  The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge, trade secrets, methods, know-how or data relating to the Company or its affiliates and their businesses or acquisition prospects that the Executive obtained or obtains during the Executive's employment by the Company ("Confidential Information"), provided that "Confidential Information" shall not include any secret or confidential information, knowledge, trade secrets, methods, know-how or data that is or becomes generally known to the public (other than as a result of the Executive's violation of this section 9).  Except as may be required and appropriate in connection with carrying out his duties under this Agreement, the Executive shall not communicate, divulge, or disseminate any material Confidential Information at any time during or after the Executive's employment with the Company, except with the prior written consent of the Company or as otherwise required by law or legal process; provided, however, that if so required, the Executive will provide the Company with reasonable notice to contest such disclosure.

(b)           Non-Solicitation.  During the Term of Employment and for the one (1) year period following the Date of Termination for any reason, the Executive will not, directly or indirectly, initiate any action to solicit or recruit anyone who is then an employee of the Company for the purpose of being employed by him or by any business, individual, partnership, firm, corporation or other entity on whose behalf Executive is acting as an agent, representative, employee or otherwise.

(c)           Non-Interference with Customers or Producers.  During the Term of Employment and for the one (1) year period following the Date of Termination for any reason, the Executive will not interfere with any business relationship between the Company and any of its customers or agents or brokers that produce business for the Company.

(d)           Non-Disparagement.  The parties agree that their professional and personal reputations are important and should not be impaired by either party after this Agreement is executed.  Executive therefore agrees not to disparage the professional or personal reputation of the Company, its officers, shareholders, directors, or management, and the Company agrees that it will not disparage Executive's professional or personal reputation.

(e)           Remedies; Severability.

(i)           The parties acknowledge that money damages will not afford an adequate remedy for a breach or threat to breach any provision of subsections 9(a) through (d).  Therefore, if a party violates or threatens to violate the provisions of subsections 9(a) through (d), in whole or in part, the other party shall be entitled to specific performance and injunctive relief, without prejudice to other remedies that it may have at law or in equity.

8

(ii)           If any term or provision of this section 9, or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this section 9, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this section 9 shall be valid and enforceable to the fullest extent permitted by law.  Moreover, if a court of competent jurisdiction deems any provision of subsections 9(a) through (d) to be too broad in time, scope, or area, it is expressly agreed that such provision shall be reformed to the maximum degree that would not render it unenforceable.

10.           Attorneys' Fees.  Each party shall pay its own legal fees, court costs, litigation expenses and/or arbitration expenses (as applicable) in connection with any dispute, litigation or arbitration regarding the validity or enforceability of, or liability under or otherwise involving any provision of this Agreement, except that if the Executive prevails on the majority of material claims disputed, the Company shall pay all reasonable legal fees, court cost, litigation expenses and/or arbitration expenses.

11.           Indemnification.  The Executive shall be indemnified by the Company for actions taken in his position as an officer, director, employee and agent of the Company to the greatest extent permitted by applicable law.  The Executive shall also be covered as an insured by a liability insurance policy secured by and maintained by the Company covering acts of its and its affiliates' officers and members of the Board.

12.           Successors.

(a)           Assignment of Agreement.  This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.

(b)           Successors of the Company.  No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor that executes and delivers the agreement provided for in this section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

13.           Arbitration.  Except for matters covered under section 9, in the event of any dispute or difference between the Company and the Executive with respect to the subject matter of this Agreement and the enforcement of rights hereunder, either the Executive or the Company may, by written notice to the other, require such dispute or difference to be submitted to arbitration.  The arbitrator or arbitrators shall be selected by agreement of the parties or, if they cannot agree on an arbitrator or arbitrators within 30 days after the date arbitration is required by either party, then the arbitrator or arbitrators shall be selected by the American Arbitration Association upon the application of the Executive or the Company.  The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute.  Execution of the determination by such arbitrator may be sought in any court of competent jurisdiction.  The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation.  Unless otherwise agreed by the parties, any such arbitration shall take place in Philadelphia, Pennsylvania.

9

14.           Miscellaneous.

(a)           Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania without reference to principles of conflict of laws.

(b)           Notices.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery, email or by facsimile (provided confirmation of receipt of such facsimile is received) to the other party or by registered or certified mail, return receipt requested, postage prepaid, or by Federal Express or other nationally-recognized overnight courier that requires signatures of recipients upon delivery and provides tracking services, addressed as follows:

If to the Executive:

If to the Company:

PMA Capital Corporation

380 Sentry Parkway

Blue Bell, PA  19422

Attention:  General Counsel

Facsimile:  610-397-5144

or to such other address as either party furnishes to the other in writing in accordance with this subsection 14(b).  Notices and communications shall be effective when actually received by the addressee.

(c)           Amendment.  This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(d)           Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.  If any provision of this Agreement shall be held invalid or unenforceable in part and if the rights and obligations of any to this Agreement will not be materially and adversely affected thereby, the remaining portion of such provision, together with all other provisions of this Agreement, shallremain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.

10

(e)           Withholding.  Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local, and foreign taxes that are required to be withheld by applicable laws or regulations.

(f)           Waiver.  The Executive's or the Company's failure to insist upon strict compliance with any provision of, or to assert any right under, this Agreement (including, without limitation, the right of the Executive to terminate employment for Good Reason) shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Agreement.

(g)           Entire Understanding; Counterparts.  The Executive and the Company acknowledge that this Agreement supersedes and terminates any other severance and/or employment agreements between the Executive and the Company or any Company affiliates.  This Agreement may be executed in several counterparts, each of which shall be deemed an original and said counterparts shall constitute but one and the same instrument.

(h)           Rights and Benefits Unsecured.  The rights and benefits of the Executive under this Agreement may not be anticipated, assigned, alienated, or subject to attachment, garnishment, levy; execution, or other legal or equitable process except as required by law.  Any attempts by the Executive to anticipate, alienate, assign, sell, transfer, pledge or encumber the same shall be void.  Payments hereunder shall not be considered assets of the Executive in the event of insolvency or bankruptcy.

(i)           Noncontravention.  The Company represents that the Company is not prevented from entering into, or performing this Agreement by the terms of any law, order, rule or regulation, its by-laws or declaration of trust, or any agreement to which it is a party.

(j)           Section and Subsection Headings.  The section and subsection headings in this Agreement are for convenience of reference only; they form no part of this Agreement and shall not affect its interpretation.

11

IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization of the Board, the Company has caused this Agreement to be executed, all as of the day and year first above written.

PMA CAPITAL CORPORATION; PENNSYLVANIA MANUFACTURERS
ASSOCIATION INSURANCE COMPANY;
MANUFACTURERS ALLIANCE INSURANCE
COMPANY; PENNSYLVANIA
MANUFACTURERS INDEMNITY COMPANY;
AND PMA MANAGEMENT CORP.
By:	/s/ Vincent T. Donnelly
	Name:	Vincent T. Donnelly
	Title:	President and Chief Executive Officer
	Date:	February 18, 2009
EXECUTIVE
/s/ John Santulli, III
Name:	John Santulli, III
Date:	February 18, 2009

12

EX-99.1

Exhibit 99.1

380 Sentry Parkway Blue Bell, PA 19422
	PRESS RELEASE
For Release:  Immediate         Contact:  William E. Hitselberger                          (610) 397-5298

PMA Capital Reports Continued Improvement in Operating Results

from Ongoing Operations

Blue Bell, PA, February 19, 2009 -- PMA Capital Corporation (NASDAQ: PMACA) today reported the following financial results for the fourth quarter and full year 2008:

	Three months ended December 31,						Year ended December 31,
(in thousands, except per share data)	2008			2007			2008			2007
Operating income	$	3,566		$	2,816		$	21,537		$	14,383
Realized gains (losses) after tax		168			368			(3,071	)		366
Income from continuing operations		3,734			3,184			18,466			14,749
Loss from discontinued operations after tax		(7,840	)		(40,746	)		(12,777	)		(57,277	)
Net income (loss)	$	(4,106	)	$	(37,562	)	$	5,689		$	(42,528	)
Diluted per share amounts:
Operating income	$	0.11		$	0.09		$	0.67		$	0.44
Realized gains (losses) after tax		0.01			0.01			(0.09	)		0.01
Income from continuing operations		0.12			0.10			0.58			0.45
Loss from discontinued operations after tax		(0.25	)		(1.27	)		(0.40	)		(1.76	)
Net income (loss)	$	(0.13	)	$	(1.17	)	$	0.18		$	(1.31	)

Vincent T. Donnelly, President and Chief Executive Officer commented, “PMA Capital ended the year with another quarter of profitable growth from its continuing operations.  Despite the slowdown in the general economy, The PMA Insurance Group’s workers’ compensation business continued to see payroll growth in its customer base.  We also continued to retain a significant percentage of our existing clients and increase new business production, while maintaining our underwriting standards.”

Significant operating highlights at The PMA Insurance Group included:

·   Pre-tax operating income increased to $8.4 million in the quarter, compared to $7.6 million for the same period last year, and increased $8.7 million to $46.7 million for full year 2008;

·   Our renewal retention rate improved to 89% in the fourth quarter, compared to 86% in the prior year quarter, and remained strong at 87% for the full year period;

·   New business written, excluding fronting premiums, increased $12.6 million to $35.7 million in the fourth quarter and increased $20.9 million to $135.5 million for the full year 2008, compared to the same periods in 2007, due primarily to increases in larger account business; and

·   The combined ratio improved by 1.6 points to 100.0% for the quarter and by 2.2 points to 97.5% for full year 2008.

Mr. Donnelly continued, “Our fee-based business revenues increased by $33.5 million to $71.6 million, which represented 14% of our total operating revenues for 2008, compared to 8% during 2007.  Organic revenue growth at PMA Management Corp. was 28% during the fourth quarter and 26% for the full year of 2008.  Our current year growth was also due to the inclusion of Midlands Management Corporation, which contributed $7.4 million and $28.0 million of revenue for the fourth quarter and full year 2008, compared to $6.5 million in the fourth quarter of 2007.  PMA Management Corp. of New England also added $3.7 million of revenues since our acquisition in June 2008.”

Mr. Donnelly concluded, “We believe the progress made over the past year will carry over into 2009 and will enable us to continue to improve our results and return on shareholders’ equity.  Absent a worsening in the economy in the second half of 2009, compared to current economic conditions, or a significant decline in the payrolls of our insureds, we expect our ongoing businesses to generate an operating return on equity of between 6.0% and 7.0% in 2009, a continued improvement over the 5.8% return delivered in 2008.”  We define operating return on equity as operating income divided by average shareholders’ equity excluding net unrealized investment gains and losses.

PMA Capital Corporation previously announced the execution of a definitive stock purchase agreement to sell its Run-off Operations and the filing of the Form A with the Pennsylvania Insurance Department.  The closing of the sale and transfer of ownership are pending approval by the Pennsylvania Insurance Department.  As previously reported, the Company made a $13.0 million capital contribution to increase the statutory surplus of its Run-off Operations in order to comply with a commitment made to an independent rating agency.  The Company recorded an $8.5 million after-tax charge at its discontinued operations in the fourth quarter to write-off the capital contribution as it believes that the additional capital will not result in an increase to the cash it expects to receive at the closing of the sale.  The Company continues to work with the buyer to ensure that the Pennsylvania Insurance Department has the information it needs to approve the transaction.

Income from continuing operations included the following after-tax net realized gains (losses):

	Three months ended December 31,						Year ended December 31,
(dollar amounts in thousands)	2008			2007			2008			2007
Net realized gains (losses) after tax:
Sales of investments	$	203		$	577		$	2,928		$	(1,084	)
Other than temporary impairments		(35	)		(136	)		(5,981	)		(136	)
Change in fair value of trading securities		-			-			-			2,093
Other		-			(73	)		(18	)		(507	)
Net realized gains (losses) after tax	$	168		$	368		$	(3,071	)	$	366

2

Financial Condition

Total assets were $2.5 billion as of December 31, 2008, compared to $2.6 billion as of December 31, 2007.  Assets of discontinued operations represented 10% of total assets at December 31, 2008, compared to 15% at December 31, 2007.  At December 31, 2008, we had $26.4 million in cash and short-term investments at our holding company and non-regulated subsidiaries.

Shareholders’ equity and book value per share changed as follows:

	Three months ended						Year ended
	December 31, 2008						December 31, 2008
(in thousands, except per share data)	Shareholders' equity			Book value per share			Shareholders' equity			Book value per share
Balance, beginning of period	$	357,994		$	11.20		$	378,584		$	11.92
Net income (loss)		(4,106	)		(0.13	)		5,689			0.18
Unrealized gain (loss) on securities, net of tax		1,221			0.04			(24,873	)		(0.78	)
Net pension liability adjustment, net of tax		(9,911	)		(0.31	)		(17,268	)		(0.54	)
Other		(542	)		(0.02	)		2,524			0.08
Impact of change in shares outstanding		-			-			-			(0.08	)
Balance, end of period	$	344,656		$	10.78		$	344,656		$	10.78

The unrealized position on our investment portfolio decreased largely due to a decline in the fair value of our commercial mortgage backed securities, which had an average credit quality rating of AAA at December 31, 2008, and to a lesser extent due to widening credit spreads on fixed income securities.  Shareholders’ equity and book value per share were also reduced due to an increase in our net pension liabilities, which resulted primarily from a decrease in the value of the investments in our pension plan that support these obligations.  Details of the Company’s investment portfolio at December 31, 2008 and 2007 are posted on our website at www.pmacapital.com.

The insurance companies within The PMA Insurance Group had statutory capital and surplus of $332.9 million as of December 31, 2008, compared to $335.4 million as of December 31, 2007.  The PMA Insurance Group has the ability to pay $31.8 million in dividends during 2009 without the prior approval of the Pennsylvania Insurance Department.  The statutory capital and surplus of PMA Capital Insurance Company (“PMACIC”), PMA Capital Corporation’s wholly-owned run-off reinsurance subsidiary which is being reported as discontinued operations, was $34.5 million as of December 31, 2008, compared to $47.6 million as of December 31, 2007.  PMACIC’s statutory capital and surplus as of December 31, 2008 included the $13.0 million capital contribution made by the holding company in the fourth quarter.

Segment Operating Results

Operating income, which we define as net income (loss) under accounting principles generally accepted in the United States (GAAP) excluding net realized investment gains (losses) and results from discontinued operations, is the financial performance measure used by our management and Board of Directors to evaluate and assess the results of our businesses.  Net realized investment activity is excluded 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 

3

decisions result in net realized gains and losses that do not relate to the operations of the individual segments.  Operating income does not replace net income (loss) as the GAAP measure of our consolidated results of operations.

The following is a reconciliation of our operating results to GAAP net income (loss).

	Three months ended						Year ended
	December 31,						December 31,
(dollar amounts in thousands)	2008			2007			2008			2007
Pre-tax operating income (loss):
The PMA Insurance Group	$	8,428		$	7,614		$	46,713		$	38,045
Fee-based Business		1,889			1,669			7,205			3,724
Corporate & Other		(4,897	)		(5,003	)		(20,651	)		(19,564	)
Pre-tax operating income		5,420			4,280			33,267			22,205
Income tax expense		1,854			1,464			11,730			7,822
Operating income		3,566			2,816			21,537			14,383
Realized gains (losses) after tax		168			368			(3,071	)		366
Income from continuing operations		3,734			3,184			18,466			14,749
Loss from discontinued operations after tax 1		(7,840	)		(40,746	)		(12,777	)		(57,277	)
Net income (loss)	$	(4,106	)	$	(37,562	)	$	5,689		$	(42,528	)

1)   Effective in the fourth quarter of 2007, the Company began reporting the results of its former Run-off Operations segment as discontinued operations.

The PMA Insurance Group

The PMA Insurance Group reported pre-tax operating income of $8.4 million for the fourth quarter of 2008, compared to $7.6 million for the fourth quarter of 2007.  Full year pre-tax operating income increased to $46.7 million in 2008, compared to $38.0 million in 2007.  The full year increase included a gain of $2.1 million for the sale of a property that previously housed one of our branch offices, which now leases a more modern facility.

Direct premium production increased during the fourth quarter and full year 2008, compared to the same periods last year.  We define direct premium production as direct premiums written, excluding fronting premiums and premium adjustments.  The increases in direct premium production for both periods primarily reflected increases in renewal premiums and increases in larger account business.

The following is a reconciliation of our direct premium production to direct premiums written:

	Three months ended						Year ended
	December 31,						December 31,
(dollar amounts in thousands)	2008			2007			2008			2007
Direct premium production	$	112,296		$	83,103		$	506,187		$	459,952
Fronting premiums		21,800			12,796			34,832			59,840
Premium adjustments		(4,261	)		(4,327	)		(23,097	)		(9,469	)
Direct premiums written	$	129,835		$	91,572		$	517,922		$	510,323

The decline in fronting premiums for the year ended December 31, 2008, compared to the same period last year, was primarily the result of the termination of our agreement with Midwest Insurance

4

Companies in March 2008.  The full year decline was partially offset by new fronting business produced under arrangements we entered into during the second half of 2008.  The increase in fronting premiums for the fourth quarter of 2008, compared to the fourth quarter in 2007, related primarily to business produced under the new arrangements.

Excluding fronting business, we wrote $35.7 million of new business in the fourth quarter of 2008, up from $23.1 million in the fourth quarter of 2007, and $135.5 million for the full year 2008, up from $114.6 million in 2007.  Pricing on our workers’ compensation rate-sensitive business declined 6% during 2008, compared to a 4% decrease during 2007.  Our renewal retention rate on existing workers’ compensation accounts for the fourth quarter of 2008 improved to 89%, compared to 86% for the same period in 2007, while our renewal retention rate was 87% for both full year periods in 2008 and 2007.

Net premiums written increased to $97.4 million in the fourth quarter of 2008, compared to $71.3 million in the same period last year.  Full year net premiums written increased to $414.7 million, compared to $395.3 million during the same period in 2007.  The increases in net premiums written for both periods primarily reflected the increases in direct production.  The full year increase in direct production was partially offset by return premium adjustments.  These premium adjustments primarily reflect favorable loss experience on loss-sensitive products where the insured shares in the underwriting result of the policy.

The combined ratios on a GAAP basis were 100.0% for the fourth quarter of 2008, compared to 101.6% in the fourth quarter last year, and 97.5% for full year 2008, compared to 99.7% in 2007.  The improvement in the combined ratio for the fourth quarter of 2008, compared to the same quarter in 2007, primarily reflected a lower loss and LAE ratio, partially offset by a higher policyholders’ dividend ratio.  The improvement in the combined ratio for the full year 2008 from 2007 primarily reflected a lower acquisition expense ratio.

The improved loss and LAE ratio for the fourth quarter of 2008 was primarily due to a lower current accident year loss and LAE ratio, compared to the fourth quarter of 2007.  Although pricing changes coupled with payroll inflation for rate-sensitive workers’ compensation business were below overall estimated loss trends, our current accident year loss and LAE ratio continued to benefit in 2008 from changes in the type of workers’ compensation products selected by our insureds.  We estimate our medical cost inflation to be 6.5% during 2008, compared to our estimate of 7% in 2007.  This decline reflects a decrease in utilization as well as our enhanced network and managed care initiatives.  The full year loss and LAE ratio benefited from favorable development in our loss-sensitive business which resulted in the retrospective premium adjustments.  We write these retrospective products because we believe they provide us with greater certainty of achieving our targeted underwriting results as the customer shares in the underwriting result of the policy with us.

The policyholders’ dividend ratio was higher in the fourth quarter of 2008, compared to the fourth quarter in 2007.  The current year period reflected better loss experience, which resulted in larger dividends on participating policies where the policyholders may receive a dividend based, to a large extent, on their loss experience.

Commissions earned under our fronting arrangements reduced the current year acquisition expense ratios by 0.5 points for the quarter and 0.7 points for full year, compared to 0.9 points and 0.7 points for the same periods in 2007, as the ceding commissions earned on this business reduce our commission expense.  The full year acquisition expense ratio in 2008 benefited by 2.0 points from reductions in premium-based state assessments.

5

Net investment income decreased to $8.6 million in the fourth quarter of 2008, compared to $9.4 million in the prior year quarter.  For the year ended December 31, 2008, net investment income decreased by $2.5 million to $35.4 million, compared to the same period in 2007.  The decreases were due primarily to lower yields of approximately 60 basis points for the quarter and 40 basis points for full year 2008.

Fee-based Business

Our Fee-based Business reported pre-tax operating income of $1.9 million for the fourth quarter of 2008, up from $1.7 million for the same quarter last year.  Pre-tax operating income for full year 2008 was $7.2 million, compared to $3.7 million a year ago.  The full year increase reflected primarily the inclusion of the results of Midlands Management Corporation, which we acquired on October 1, 2007.

For the fourth quarter of 2008, total revenues increased to $20.1 million, compared to $14.8 million for the same period last year.  The increase in revenues for the fourth quarter primarily reflected higher claims service revenues of $5.8 million.  Total revenues for full year 2008 increased to $71.6 million, compared to $38.1 million in 2007.  The full year growth in revenues was primarily due to the acquisition of Midlands, and also reflected 26% organic growth at PMA Management Corp. and $3.7 million in revenues from PMA Management Corp. of New England, Inc. (formerly Webster Risk Services), which we acquired on June 30, 2008.  The total increase in revenues during 2008, compared to prior year, consisted primarily of $24.3 million in higher claims service revenues and $9.4 million in additional commission income.

Corporate and Other

The Corporate and Other segment, which includes primarily corporate expenses and debt service, recorded net expenses of $4.9 million during the fourth quarter of 2008, compared to $5.0 million in the fourth quarter of 2007.  Net expenses were $20.7 million for full year 2008, compared to $19.6 million in 2007.  The full year increase in net expenses relates primarily to certain intercompany transactions which are eliminated in the Corporate and Other segment.

Discontinued Operations

Discontinued operations, formerly our Run-off Operations, which consists of our former reinsurance and excess and surplus lines businesses, recorded after-tax losses of $7.8 million and $12.8 million for the fourth quarter and full year 2008, compared to after-tax losses of $40.7 million and $57.3 million for the same periods in 2007.  Results for the fourth quarter and full year 2008 included an after-tax charge of $8.5 million, resulting from a capital contribution received from the holding company.  The capital contribution, which included $5.0 million of cash and a promissory note of $8.0 million, $4.0 million payable in each of March 2009 and March 2010, increased the statutory capital of the Run-off Operations.  The increase was written-off in the fourth quarter as we believe that the additional capital will not result in an increase to the cash that we expect to receive at closing.  Results for 2008 also included an after-tax charge of $4.9 million for adverse loss development.  The expected cash to be received at closing and the face amount of the contingent consideration each remain at $2.5 million.  We have reflected only the expected cash amount in our financials.  Results for the fourth quarter and full year 2007 reflected an impairment loss of $40.0 million.  Results for 2007 also included an after-tax charge of $14.3 million for prior year loss development recorded in the third quarter.

6

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, February 20th to review our fourth quarter and full year 2008 results.  The conference call will be available via a live webcast over the Internet at www.pmacapital.com.  To access the webcast, enter the Investor Information section, click on News Releases and then click 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
888-679-8040(Domestic)	888-286-8010(Domestic)
617-213-4851(International)	617-801-6888(International)
Passcode 98250473	Passcode 71082241

You may pre-register for the conference call using the following link:

www.theconferencingservice.com/prereg/key.process?key=PRXAL4CWH

Pre-registering is not mandatory but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the conference.  Pre-registration only takes a few moments and you may pre-register at anytime, including up to and after the call start time.  Alternatively, if you would rather be placed into the call by an operator, please use the dial-in information above at least 15 minutes prior to the call start time.

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, February 20th until 5:00 p.m. Eastern Time on Friday, March 20th.

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

380 Sentry Parkway

Blue Bell, PA 19422

Attention: Investor Relations

Alternatively, you may make a request by telephone (610-397-5298) or by email to InvestorRelations@pmacapital.com.  We will also furnish a copy of this news release and the Statistical Supplement to the Securities and Exchange Commission on a Form 8-K.  A copy of the Form 8-K will be available on the SEC’s website at www.sec.gov.

7

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 with respect to the Company’s financial condition and results of operations and the plans and objectives of its management.  Forward-looking statements can generally be identified by use of forward-looking terminology such as “may,” “will,” “plan,” “expect,” “intend,” “anticipate,” and “believe.”  These forward-looking statements may include estimates, assumptions or projections and are based on currently available financial, competitive and economic data and the Company’s current operating plans.  All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.  The factors that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to:

·   adverse property and casualty loss development for events that we insured in prior years, including unforeseen increases in medical costs and changing judicial interpretations of available coverage for certain insured losses;

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

·   disruptions in the financial markets which may affect our ability to sell our investments;

·   our ability to increase the amount of new and renewal business written by The PMA Insurance Group at adequate prices or revenues of our fee-based businesses;

·   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;

·   any future lowering or loss of one or more of our financial strength and debt ratings, and the adverse impact that any such downgrade may have on our ability to compete and to raise capital, and our liquidity and financial condition;

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

·   adequacy and collectibility of reinsurance that we purchase;

·   adequacy of reserves for claim liabilities;

·   whether state or federal asbestos liability legislation is enacted and the impact of such legislation on us;

·   regulatory changes in risk-based capital or other 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 impact of future results on the recoverability of our deferred tax asset;

·   the outcome of any litigation against us;

·   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;

·   our ability to implement and maintain adequate rates on our insurance products;

·   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;

·   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;

·   uncertainties related to possible terrorist activities or international hostilities and whether the Terrorism Risk Insurance Program Reauthorization Act of 2007 is extended beyond its December 31, 2014 termination date; and

·   other factors or uncertainties disclosed from time to time in our filings with the Securities and Exchange Commission.

You should not place undue reliance on any forward-looking statements in this press release.  Forward-looking statements are not generally required to be publicly revised as circumstances change and we do not intend to update the forward-looking statements in this press release to reflect circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

8

PMA Capital Corporation

GAAP Consolidated Statements of Operations

(Unaudited)

	Three months ended December 31,
(dollar amounts in thousands, except per share data)	2008			2007
Gross premiums written	$	132,217		$	94,914
Net premiums written	$	97,313		$	71,189
Revenues:
Net premiums earned	$	103,727		$	93,617
Claims service revenues		16,785			11,239
Commission income		2,835			3,005
Net investment income		8,724			9,973
Net realized investment gains		259			566
Other revenues		356			168
Total revenues		132,686			118,568
Expenses:
Losses and loss adjustment expenses		70,671			66,152
Acquisition expenses		16,521			18,027
Operating expenses		34,379			24,629
Dividends to policyholders		2,762			1,916
Interest expense		2,674			2,998
Total losses and expenses		127,007			113,722
Pre-tax income		5,679			4,846
Income tax expense (benefit):
Current		(211	)		(321	)
Deferred		2,156			1,983
Total income tax expense		1,945			1,662
Income from continuing operations		3,734			3,184
Loss from discontinued operations after tax		(7,840	)		(40,746	)
Net loss	$	(4,106	)	$	(37,562	)
Income (loss) per share:
Basic:
Continuing Operations	$	0.12		$	0.10
Discontinued Operations		(0.25	)		(1.28	)
	$	(0.13	)	$	(1.18	)
Diluted:
Continuing Operations	$	0.12		$	0.10
Discontinued Operations		(0.25	)		(1.27	)
	$	(0.13	)	$	(1.17	)

9

PMA Capital Corporation

GAAP Consolidated Statements of Operations

(Unaudited)

	Year ended December 31,
(dollar amounts in thousands, except per share data)	2008			2007
Gross premiums written	$	528,915		$	524,172
Net premiums written	$	414,237		$	394,698
Revenues:
Net premiums earned	$	390,217		$	378,243
Claims service revenues		57,370			34,034
Commission income		12,384			3,005
Net investment income		36,069			39,592
Net realized investment gains (losses)		(4,724	)		563
Other revenues		2,841			340
Total revenues		494,157			455,777
Expenses:
Losses and loss adjustment expenses		270,825			263,199
Acquisition expenses		66,635			73,747
Operating expenses		110,965			76,541
Dividends to policyholders		6,306			7,790
Interest expense		10,883			11,732
Total losses and expenses		465,614			433,009
Pre-tax income		28,543			22,768
Income tax expense:
Current		705			416
Deferred		9,372			7,603
Total income tax expense		10,077			8,019
Income from continuing operations		18,466			14,749
Loss from discontinued operations after tax		(12,777	)		(57,277	)
Net income (loss)	$	5,689		$	(42,528	)
Income (loss) per share:
Basic:
Continuing Operations	$	0.58		$	0.46
Discontinued Operations		(0.40	)		(1.78	)
	$	0.18		$	(1.32	)
Diluted:
Continuing Operations	$	0.58		$	0.45
Discontinued Operations		(0.40	)		(1.76	)
	$	0.18		$	(1.31	)

10

PMA Capital Corporation

GAAP Consolidated Balance Sheets

(Unaudited)

	December 31,			December 31,
(dollar amounts in thousands, except per share data)	2008			2007
Assets:
Investments:
Fixed maturities available for sale	$	719,048		$	728,725
Short-term investments		42,949			78,426
Total investments		761,997			807,151
Cash		10,501			15,828
Accrued investment income		6,513			5,768
Premiums receivable		235,893			222,140
Reinsurance receivables		826,126			795,938
Prepaid reinsurance premiums		29,579			32,361
Deferred income taxes, net		138,514			118,857
Deferred acquisition costs		40,938			37,404
Funds held by reinsureds		51,754			42,418
Intangible assets		30,348			22,779
Other assets		126,890			105,341
Assets of discontinued operations		243,663			375,656
Total assets	$	2,502,716		$	2,581,641
Liabilities:
Unpaid losses and loss adjustment expenses	$	1,242,258		$	1,212,956
Unearned premiums		247,415			226,178
Debt		129,380			131,262
Accounts payable, accrued expenses
and other liabilities		216,266			195,895
Reinsurance funds held and balances payable		44,177			39,324
Dividends to policyholders		6,862			5,839
Liabilities of discontinued operations		271,702			391,603
Total liabilities		2,158,060			2,203,057
Shareholders' Equity:
Class A Common Stock		171,090			171,090
Additional paid-in capital		112,921			111,088
Retained earnings		140,184			136,627
Accumulated other comprehensive loss		(49,876	)		(6,663	)
Treasury stock, at cost		(29,663	)		(33,558	)
Total shareholders' equity		344,656			378,584
Total liabilities and shareholders' equity	$	2,502,716		$	2,581,641
Shareholders' equity per share	$	10.78		$	11.92

11

EX-99.2

Exhibit 99.2

PMA Capital Corporation
Statistical Supplement
Fourth Quarter - 2008
Table of Contents
		Page
Consolidated Highlights:
Selected Financial Data - Fourth Quarter			1
Selected Financial Data - Full Year			2
Consolidated Statements of Operations - Per Share Data			3
Consolidated Statements of Operations - Fourth Quarter			5
Consolidated Statements of Operations - Full Year			6
Consolidated Balance Sheets			7
Assets and Liabilities of Discontinued Operations; Selected Balance Sheet Items - Fronting Arrangements;
Rollforward of Deferred Policy Acquisition Costs - PMA Insurance Group			8
Invested Assets and Net Investment Income; Debt			9
Segment Information:
Statements of Operations - Consolidating - Full Year		11 - 12
Statements of Operations - Consolidating - Fourth Quarter		13 - 14
Statements of Operations - PMA Insurance Group			15
Insurance Ratios - PMA Insurance Group			16
Components of Direct Premiums Written - PMA Insurance Group			17
Statements of Operations - Fee-based Business			18
Statements of Operations - Corporate & Other			19
Statements of Operations - Discontinued Operations			20
Operating Cash Flow Information:
Operating Cash Flows - Consolidated			21
Operating Cash Flows - PMA Insurance Group			22
Operating Cash Flows - Fee-based Business			23
Statutory Financial Information:
Statutory Surplus; Statutory Financial Information - PMA Pool			24
Other Information:
Industry Ratings and Market Information			25
Legend:
NM - Not Meaningful
	Operating income, which we define as GAAP net income (loss) excluding net realized investment gains and losses and the results from discontinued operations, is the financial performance measure used by our management and Board of Directors to evaluate and assess the results of our businesses.  Net realized investment activity is excluded 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 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)

	4th			1st			2nd			3rd			4th			% Change
	Quarter			Quarter			Quarter			Quarter			Quarter			4th
	2007			2008			2008			2008			2008			Quarter
Direct Premiums Written	$	91,416		$	140,431		$	99,092		$	148,193		$	129,713			41.9	%
Net Premiums Written	$	71,189		$	113,783		$	79,146		$	123,995		$	97,313			36.7	%
Revenues:
Net premiums earned	$	93,617		$	85,596		$	102,920		$	97,974		$	103,727			10.8	%
Claims service revenues		11,239			11,952			12,937			15,696			16,785			49.3	%
Commission income		3,005			4,281			2,631			2,637			2,835			-5.7	%
Net investment income		9,973			9,435			9,040			8,870			8,724			-12.5	%
Net realized investment gains (losses)		566			3,518			(572	)		(7,929	)		259			-54.2	%
Other revenues		168			146			2,214			125			356		NM
Total revenues	$	118,568		$	114,928		$	129,170		$	117,373		$	132,686			11.9	%
Major Components of Net Income (Loss):
Pre-tax operating income (loss) by segment:
PMA Insurance Group	$	7,614		$	13,619		$	11,341		$	13,325		$	8,428			10.7	%
Fee-based Business		1,669			2,186			1,201			1,929			1,889			13.2	%
Corporate & Other		(5,003	)		(5,011	)		(5,424	)		(5,319	)		(4,897	)		2.1	%
Pre-tax operating income		4,280			10,794			7,118			9,935			5,420			26.6	%
Income tax expense		1,464			3,811			2,535			3,530			1,854			26.6	%
After-tax operating income		2,816			6,983			4,583			6,405			3,566			26.6	%
Net realized investment gains (losses) after tax		368			2,287			(372	)		(5,154	)		168			-54.3	%
Income from continuing operations		3,184			9,270			4,211			1,251			3,734			17.3	%
Loss from discontinued operations after tax		(40,746	)		(2,439	)		(188	)		(2,310	)		(7,840	)		80.8	%
Net income (loss)	$	(37,562	)	$	6,831		$	4,023		$	(1,059	)	$	(4,106	)		89.1	%
Diluted Earnings (Loss) Per Share:
After-tax operating income	$	0.09		$	0.22		$	0.14		$	0.20		$	0.11			22.2	%
Realized gains (losses) after tax		0.01			0.07			(0.01	)		(0.16	)		0.01			0.0	%
Income from continuing operations		0.10			0.29			0.13			0.04			0.12			20.0	%
Loss from discontinued operations after tax		(1.27	)		(0.08	)		-			(0.07	)		(0.25	)		80.3	%
Net income (loss)	$	(1.17	)	$	0.21		$	0.13		$	(0.03	)	$	(0.13	)		88.9	%
Capitalization:
Debt	$	131,262		$	129,790		$	129,790		$	129,380		$	129,380			-1.4	%
Shareholders' equity excluding FAS 115 unrealized gain (loss)		374,603			381,255			387,761			380,107			365,547			-2.4	%
Total capitalization excluding FAS 115 unrealized gain (loss)		505,865			511,045			517,551			509,487			494,927			-2.2	%
FAS 115 unrealized gain (loss)		3,981			2,464			(7,166	)		(22,113	)		(20,891	)	NM
Total capitalization including FAS 115 unrealized gain (loss)	$	509,846		$	513,509		$	510,385		$	487,374		$	474,036			-7.0	%
Book Value Per Share:
Excluding FAS 115 unrealized gain (loss)	$	11.79		$	12.00		$	12.14		$	11.89		$	11.44			-3.0	%
Including FAS 115 unrealized gain (loss)	$	11.92		$	12.08		$	11.92		$	11.20		$	10.78			-9.6	%
Debt to Total Capital:
Excluding FAS 115 unrealized gain (loss)		25.9	%		25.4	%		25.1	%		25.4	%		26.1	%		0.8	%
Including FAS 115 unrealized gain (loss)		25.7	%		25.3	%		25.4	%		26.5	%		27.3	%		6.2	%
Interest Coverage:
Income from continuing operations before interest and income taxes to interest expense		2.62			6.14			3.44			1.73			3.12			19.1	%
Operating income from continuing operations before interest and income taxes to interest expense		2.43			4.87			3.65			4.63			3.03			24.7	%

1

PMA Capital Corporation

Selected Financial Data

(Dollar Amounts in Thousands, Except Per Share Data)

	Twelve			Twelve			% Change
	Months			Months			Twelve
	2008			2007			Months
Direct Premiums Written	$	517,429		$	509,696			1.5	%
Net Premiums Written	$	414,237		$	394,698			5.0	%
Revenues:
Net premiums earned	$	390,217		$	378,243			3.2	%
Claims service revenues		57,370			34,034			68.6	%
Commission income		12,384			3,005		NM
Net investment income		36,069			39,592			-8.9	%
Net realized investment gains (losses)		(4,724	)		563		NM
Other revenues		2,841			340		NM
Total revenues	$	494,157		$	455,777			8.4	%
Major Components of Net Income (Loss):
Pre-tax operating income (loss) by segment:
PMA Insurance Group	$	46,713		$	38,045			22.8	%
Fee-based Business		7,205			3,724			93.5	%
Corporate & Other		(20,651	)		(19,564	)		-5.6	%
Pre-tax operating income		33,267			22,205			49.8	%
Income tax expense		11,730			7,822			50.0	%
After-tax operating income		21,537			14,383			49.7	%
Net realized investment gains (losses) after tax		(3,071	)		366		NM
Income from continuing operations		18,466			14,749			25.2	%
Loss from discontinued operations after tax		(12,777	)		(57,277	)		77.7	%
Net income (loss)	$	5,689		$	(42,528	)	NM
Diluted Earnings (Loss) Per Share:
After-tax operating income	$	0.67		$	0.44			52.3	%
Realized gains (losses) after tax		(0.09	)		0.01		NM
Income from continuing operations		0.58			0.45			28.9	%
Loss from discontinued operations after tax		(0.40	)		(1.76	)		77.3	%
Net income (loss)	$	0.18		$	(1.31	)	NM

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
	2007			2008			2008		2008			2008			2008			2007
Diluted Earnings (Loss) Per Share:
Pre-tax operating income	$	0.13		$	0.34		$	0.22	$	0.31		$	0.17		$	1.04		$	0.68
After-tax operating income	$	0.09		$	0.22		$	0.14	$	0.20		$	0.11		$	0.67		$	0.44
Income from continuing operations	$	0.10		$	0.29		$	0.13	$	0.04		$	0.12		$	0.58		$	0.45
Loss from discontinued operations after tax		(1.27	)		(0.08	)		-		(0.07	)		(0.25	)		(0.40	)		(1.76	)
Net income (loss)	$	(1.17	)	$	0.21		$	0.13	$	(0.03	)	$	(0.13	)	$	0.18		$	(1.31	)
Diluted weighted average common
shares outstanding		32,079,673			31,942,896			32,132,576		32,200,554			31,968,555			32,038,781			32,578,025
Dividends declared:
Class A Common Stock	$	-		$	-		$	-	$	-		$	-		$	-		$	-
Actual common shares issued
and outstanding		31,761,106			31,765,817			31,940,651		31,965,806			31,965,806			31,965,806			31,761,106
Class A Common Stock prices:
High	$	10.69		$	9.14		$	10.23	$	12.00		$	9.47		$	12.00		$	11.40
Low	$	8.05		$	7.45		$	8.24	$	8.00		$	3.46		$	3.46		$	8.05
Close	$	8.22		$	8.54		$	9.21	$	8.82		$	7.08		$	7.08		$	8.22

3

This Page Intentionally Left Blank

4

PMA Capital Corporation

Consolidated Statements of Operations

(Dollar Amounts in Thousands)

	4th			1st			2nd			3rd			4th			% Change
	Quarter			Quarter			Quarter			Quarter			Quarter			4th
	2007			2008			2008			2008			2008			Quarter
Gross Premiums Written	$	94,914		$	143,541		$	101,659		$	151,498		$	132,217			39.3	%
Net Premiums Written	$	71,189		$	113,783		$	79,146		$	123,995		$	97,313			36.7	%
Revenues:
Net premiums earned	$	93,617		$	85,596		$	102,920		$	97,974		$	103,727			10.8	%
Claims service revenues		11,239			11,952			12,937			15,696			16,785			49.3	%
Commission income		3,005			4,281			2,631			2,637			2,835			-5.7	%
Net investment income		9,973			9,435			9,040			8,870			8,724			-12.5	%
Net realized investment gains (losses)		566			3,518			(572	)		(7,929	)		259			-54.2	%
Other revenues		168			146			2,214			125			356		NM
Total revenues		118,568			114,928			129,170			117,373			132,686			11.9	%
Expenses:
Losses and loss adjustment expenses		66,152			59,922			71,572			68,660			70,671			6.8	%
Acquisition expenses		18,027			14,692			19,524			15,898			16,521			-8.4	%
Operating expenses		24,629			22,333			27,347			26,906			34,379			39.6	%
Dividends to policyholders		1,916			882			1,493			1,169			2,762			44.2	%
Interest expense		2,998			2,787			2,688			2,734			2,674			-10.8	%
Total losses and expenses		113,722			100,616			122,624			115,367			127,007			11.7	%
Pre-tax income		4,846			14,312			6,546			2,006			5,679			17.2	%
Income tax expense (benefit):
Current		(321	)		-			151			765			(211	)		34.3	%
Deferred		1,983			5,042			2,184			(10	)		2,156			8.7	%
Total income tax expense		1,662			5,042			2,335			755			1,945			17.0	%
Income from continuing operations		3,184			9,270			4,211			1,251			3,734			17.3	%
Loss from discontinued operations after tax		(40,746	)		(2,439	)		(188	)		(2,310	)		(7,840	)		80.8	%
Net income (loss)	$	(37,562	)	$	6,831		$	4,023		$	(1,059	)	$	(4,106	)		89.1	%
Pre-tax operating income from continuing operations	$	4,280		$	10,794		$	7,118		$	9,935		$	5,420			26.6	%
After-tax operating income from continuing operations	$	2,816		$	6,983		$	4,583		$	6,405		$	3,566			26.6	%

5

PMA Capital Corporation
Consolidated Statements of Operations
(Dollar Amounts in Thousands)
	Twelve			Twelve			% Change
	Months			Months			Twelve
	2008			2007			Months
Gross Premiums Written	$	528,915		$	524,172			0.9	%
Net Premiums Written	$	414,237		$	394,698			5.0	%
Revenues:
Net premiums earned	$	390,217		$	378,243			3.2	%
Claims service revenues		57,370			34,034			68.6	%
Commission income		12,384			3,005		NM
Net investment income		36,069			39,592			-8.9	%
Net realized investment gains (losses)		(4,724	)		563		NM
Other revenues		2,841			340		NM
Total revenues		494,157			455,777			8.4	%
Expenses:
Losses and loss adjustment expenses		270,825			263,199			2.9	%
Acquisition expenses		66,635			73,747			-9.6	%
Operating expenses		110,965			76,541			45.0	%
Dividends to policyholders		6,306			7,790			-19.1	%
Interest expense		10,883			11,732			-7.2	%
Total losses and expenses		465,614			433,009			7.5	%
Pre-tax income		28,543			22,768			25.4	%
Income tax expense:
Current		705			416			69.5	%
Deferred		9,372			7,603			23.3	%
Total income tax expense		10,077			8,019			25.7	%
Income from continuing operations		18,466			14,749			25.2	%
Loss from discontinued operations after tax		(12,777	)		(57,277	)		77.7	%
Net income (loss)	$	5,689		$	(42,528	)	NM
Pre-tax operating income from continuing operations	$	33,267		$	22,205			49.8	%
After-tax operating income from continuing operations	$	21,537		$	14,383			49.7	%

6

PMA Capital Corporation

Consolidated Balance Sheets

(Dollar Amounts in Thousands)

	4th			1st			2nd			3rd			4th
	Quarter			Quarter			Quarter			Quarter			Quarter
	2007			2008			2008			2008			2008
Assets:
Investments in fixed maturities available for sale	$	728,725		$	719,570		$	730,466		$	701,738		$	719,048
Short-term investments		78,426			78,086			59,785			88,358			42,949
Total investments		807,151			797,656			790,251			790,096			761,997
Cash		15,828			14,552			10,557			12,502			10,501
Accrued investment income		5,768			5,462			5,762			6,104			6,513
Premiums receivable		222,140			239,783			215,030			226,709			235,893
Reinsurance receivables		795,938			818,789			817,182			824,512			826,126
Prepaid reinsurance premiums		32,361			28,977			21,414			23,051			29,579
Deferred income taxes, net		118,857			116,342			117,983			131,132			138,514
Deferred acquisition costs		37,404			42,547			38,739			43,317			40,938
Funds held by reinsureds		42,418			44,622			46,980			49,292			51,754
Intangible assets		22,779			22,589			30,013			30,518			30,348
Other assets		105,341			115,255			125,533			152,327			126,890
Assets of discontinued operations		375,656			348,921			317,189			309,607			243,663
Total assets	$	2,581,641		$	2,595,495		$	2,536,633		$	2,599,167		$	2,502,716
Liabilities:
Unpaid losses and loss adjustment expenses	$	1,212,956		$	1,227,287		$	1,240,224		$	1,247,069		$	1,242,258
Unearned premiums		226,178			250,981			219,643			247,302			247,415
Debt		131,262			129,790			129,790			129,380			129,380
Accounts payable, accrued expenses
and other liabilities		195,895			191,029			193,342			247,196			216,266
Reinsurance funds held and balances payable		39,324			39,287			31,947			34,185			44,177
Dividends to policyholders		5,839			5,845			5,459			5,150			6,862
Liabilities of discontinued operations		391,603			367,557			335,633			330,891			271,702
Total liabilities		2,203,057			2,211,776			2,156,038			2,241,173			2,158,060
Shareholders' Equity:
Class A Common Stock		171,090			171,090			171,090			171,090			171,090
Additional paid-in capital		111,088			111,588			111,754			112,427			112,921
Retained earnings		136,627			143,418			145,638			144,286			140,184
Accumulated other comprehensive loss		(6,663	)		(8,917	)		(17,743	)		(40,149	)		(49,876	)
Treasury stock, at cost		(33,558	)		(33,460	)		(30,144	)		(29,660	)		(29,663	)
Total shareholders' equity		378,584			383,719			380,595			357,994			344,656
Total liabilities and shareholders' equity	$	2,581,641		$	2,595,495		$	2,536,633		$	2,599,167		$	2,502,716

7

PMA Capital Corporation

Assets and Liabilities of Discontinued Operations

(Dollar Amounts in Thousands)

	4th		1st		2nd		3rd		4th
	Quarter		Quarter		Quarter		Quarter		Quarter
	2007		2008		2008		2008		2008
Assets
Investments	$	219,678	$	186,466	$	172,732	$	160,240	$	146,033
Cash		5,665		10,305		726		692		1,371
Reinsurance receivables		150,097		144,994		136,212		134,133		94,956
Other assets		216		7,156		7,519		14,542		1,303
Assets of discontinued operations	$	375,656	$	348,921	$	317,189	$	309,607	$	243,663
Liabilities
Unpaid losses and loss adjustment expenses	$	339,077	$	317,165	$	289,190	$	281,386	$	247,442
Other liabilities		52,526		50,392		46,443		49,505		24,260
Liabilities of discontinued operations	$	391,603	$	367,557	$	335,633	$	330,891	$	271,702

PMA Capital Corporation

Selected Balance Sheet Items - Fronting Arrangements

(Dollar Amounts in Thousands)

	4th		1st		2nd		3rd		4th
	Quarter		Quarter		Quarter		Quarter		Quarter
	2007		2008		2008		2008		2008
Assets
Premiums receivable	$	27,847	$	22,714	$	11,145	$	8,087	$	25,796
Reinsurance receivables		30,377		37,711		42,691		44,668		47,280
Prepaid reinsurance premiums		22,665		16,956		8,513		5,020		16,048
Deferred acquisition costs		254		189		61		79		748
Other assets		7,332		7,285		6,234		6,315		6,723
Liabilities
Unpaid losses and loss adjustment expenses	$	30,978	$	38,739	$	44,078	$	46,301	$	49,494
Unearned premiums		24,413		18,500		9,555		5,845		19,667
Reinsurance funds held and balances payable		21,333		16,510		8,047		6,126		20,965
Other liabilities		11,511		11,564		8,586		7,459		10,116

PMA Capital Corporation

Rollforward of Deferred Policy Acquisition Costs - PMA Insurance Group

(Dollar Amounts in Thousands)

	4th			1st			2nd			3rd			4th
	Quarter			Quarter			Quarter			Quarter			Quarter
	2007			2008			2008			2008			2008
Balance Sheet
Balance, beginning of period	$	42,626		$	37,404		$	42,547		$	38,739		$	43,317
Policy acquisition costs deferred		12,805			19,835			15,729			20,501			14,170
Amortization of policy acquisition costs		(18,027	)		(14,692	)		(19,537	)		(15,923	)		(16,549	)
Net change		(5,222	)		5,143			(3,808	)		4,578			(2,379	)
Balance, end of period	$	37,404		$	42,547		$	38,739		$	43,317		$	40,938

8

PMA Capital Corporation

Invested Assets and Net Investment Income

(Dollar Amounts in Thousands)

		4th			1st			2nd			3rd			4th			Twelve			Twelve
		Quarter			Quarter			Quarter			Quarter			Quarter			Months			Months
		2007			2008			2008			2008			2008			2008			2007
Total Investments & Cash
As reported		$	822,979		$	812,208		$	800,808		$	802,598		$	772,498		$	772,498		$	822,979
Less:
	Unrealized gain (loss) on
	fixed maturities available for sale		6,138			4,024			(10,663	)		(33,148	)		(30,758	)		(30,758	)		6,138
	Total adjusted investments & cash	$	816,841		$	808,184		$	811,471		$	835,746		$	803,256		$	803,256		$	816,841
Net Investment Income
As reported		$	9,973		$	9,435		$	9,040		$	8,870		$	8,724		$	36,069		$	39,592
Less:
	Interest on funds held		(676	)		(506	)		(558	)		(616	)		(479	)		(2,159	)		(2,194	)
	Total adjusted investment income	$	10,649		$	9,941		$	9,598		$	9,486		$	9,203		$	38,228		$	41,786
Yield
As reported			4.88	%		4.62	%		4.48	%		4.43	%		4.43	%		4.50	%		4.88	%
Investment portfolio			5.22	%		4.89	%		4.74	%		4.61	%		4.49	%		4.69	%		5.12	%
Duration (in years)			3.7			3.8			3.8			3.6			3.2			3.2			3.7
PMA Capital Corporation
Debt
(Dollar Amounts in Thousands)
					Amount
					Outstanding			Maturity
	Junior subordinated debt 1				$	64,435		2033 - 2037
	8.50% senior notes					54,900		2018
	Surplus notes 2					10,000		2035
	4.25% convertible debt					45		20223
	Total long-term debt				$	129,380
1	Weighted average interest rate on junior subordinated debt is 5.94% as of December 31, 2008.
2	Interest rate on surplus notes is 7.69% as of December 31, 2008.
3	Holders of this debt, at their option, may require us to repurchase all or a portion of their debentures on September 30, 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.

9

This Page Intentionally Left Blank

10

PMA Capital Corporation
Statements of Operations - Consolidating
Year Ended December 31, 2008
(Dollar Amounts in Thousands)
	PMA
	Insurance		Fee-based		Corporate
	Group		Business		& Other1			Consolidated
Gross Premiums Written	$	529,409	$	-	$	(494	)	$	528,915
Net Premiums Written	$	414,731	$	-	$	(494	)	$	414,237
Revenues:
Net premiums earned	$	390,711	$	-	$	(494	)	$	390,217
Claims service revenues		-		58,301		(931	)		57,370
Commission income		-		12,435		(51	)		12,384
Net investment income		35,431		540		98			36,069
Other revenues		2,138		334		369			2,841
Total operating revenues		428,280		71,610		(1,009	)		498,881
Losses and Expenses:
Losses and loss adjustment expenses		270,825		-		-			270,825
Acquisition expenses		66,701		-		(66	)		66,635
Operating expenses		36,946		64,405		9,614			110,965
Dividends to policyholders		6,306		-		-			6,306
Total losses and expenses		380,778		64,405		9,548			454,731
Operating income (loss) before income taxes
and interest expense		47,502		7,205		(10,557	)		44,150
Interest expense		789		-		10,094			10,883
Pre-tax operating income (loss)	$	46,713	$	7,205	$	(20,651	)		33,267
Net realized investment losses									(4,724	)
Pre-tax income								$	28,543

1 Corporate & Other includes the effect of eliminating transactions between the operating segments.

11

PMA Capital Corporation
Statements of Operations - Consolidating
Year Ended December 31, 2007
(Dollar Amounts in Thousands)
	PMA
	Insurance		Fee-based		Corporate
	Group		Business		& Other1			Consolidated
Gross Premiums Written	$	524,799	$	-	$	(627	)	$	524,172
Net Premiums Written	$	395,325	$	-	$	(627	)	$	394,698
Revenues:
Net premiums earned	$	378,870	$	-	$	(627	)	$	378,243
Claims service revenues		-		34,034		-			34,034
Commission income		-		3,005		-			3,005
Net investment income		37,936		972		684			39,592
Other revenues		-		113		227			340
Total operating revenues		416,806		38,124		284			455,214
Losses and Expenses:
Losses and loss adjustment expenses		263,199		-		-			263,199
Acquisition expenses		73,747		-		-			73,747
Operating expenses		33,024		34,400		9,117			76,541
Dividends to policyholders		7,790		-		-			7,790
Total losses and expenses		377,760		34,400		9,117			421,277
Operating income (loss) before income taxes
and interest expense		39,046		3,724		(8,833	)		33,937
Interest expense		1,001		-		10,731			11,732
Pre-tax operating income (loss)	$	38,045	$	3,724	$	(19,564	)		22,205
Net realized investment gains									563
Pre-tax income								$	22,768

1 Corporate & Other includes the effect of eliminating transactions between the operating segments.

12

PMA Capital Corporation
Statements of Operations - Consolidating
Three Months Ended December 31, 2008
(Dollar Amounts in Thousands)
	PMA
	Insurance		Fee-based		Corporate
	Group		Business		& Other1			Consolidated
Gross Premiums Written	$	132,340	$	-	$	(123	)	$	132,217
Net Premiums Written	$	97,436	$	-	$	(123	)	$	97,313
Revenues:
Net premiums earned	$	103,850	$	-	$	(123	)	$	103,727
Claims service revenues		-		17,029		(244	)		16,785
Commission income		-		2,848		(13	)		2,835
Net investment income		8,613		143		(32	)		8,724
Other revenues		18		59		279			356
Total operating revenues		112,481		20,079		(133	)		132,427
Losses and Expenses:
Losses and loss adjustment expenses		70,671		-		-			70,671
Acquisition expenses		16,549		-		(28	)		16,521
Operating expenses		13,875		18,190		2,314			34,379
Dividends to policyholders		2,762		-		-			2,762
Total losses and expenses		103,857		18,190		2,286			124,333
Operating income (loss) before income taxes
and interest expense		8,624		1,889		(2,419	)		8,094
Interest expense		196		-		2,478			2,674
Pre-tax operating income (loss)	$	8,428	$	1,889	$	(4,897	)		5,420
Net realized investment gains									259
Pre-tax income								$	5,679

1 Corporate & Other includes the effect of eliminating transactions between the operating segments.

13

PMA Capital Corporation
Statements of Operations - Consolidating
Three Months Ended December 31, 2007
(Dollar Amounts in Thousands)
	PMA
	Insurance		Fee-based		Corporate
	Group		Business		& Other1			Consolidated
Gross Premiums Written	$	95,070	$	-	$	(156	)	$	94,914
Net Premiums Written	$	71,345	$	-	$	(156	)	$	71,189
Revenues:
Net premiums earned	$	93,773	$	-	$	(156	)	$	93,617
Claims service revenues		-		11,239		-			11,239
Commission income		-		3,005		-			3,005
Net investment income		9,406		435		132			9,973
Other revenues		-		113		55			168
Total operating revenues		103,179		14,792		31			118,002
Losses and Expenses:
Losses and loss adjustment expenses		66,152		-		-			66,152
Acquisition expenses		18,027		-		-			18,027
Operating expenses		9,223		13,123		2,283			24,629
Dividends to policyholders		1,916		-		-			1,916
Total losses and expenses		95,318		13,123		2,283			110,724
Operating income (loss) before income taxes
and interest expense		7,861		1,669		(2,252	)		7,278
Interest expense		247		-		2,751			2,998
Pre-tax operating income (loss)	$	7,614	$	1,669	$	(5,003	)		4,280
Net realized investment gains									566
Pre-tax income								$	4,846

1 Corporate & Other includes the effect of eliminating transactions between the operating segments.

14

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
	2007		2008		2008		2008		2008		2008		2007		Quarter			Months
Gross Premiums Written	$	95,070	$	143,663	$	101,786	$	151,620	$	132,340	$	529,409	$	524,799		39.2	%		0.9	%
Net Premiums Written	$	71,345	$	113,905	$	79,273	$	124,117	$	97,436	$	414,731	$	395,325		36.6	%		4.9	%
Revenues:
Net premiums earned	$	93,773	$	85,718	$	103,047	$	98,096	$	103,850	$	390,711	$	378,870		10.7	%		3.1	%
Net investment income		9,406		9,099		8,943		8,776		8,613		35,431		37,936		-8.4	%		-6.6	%
Other revenues		-		-		2,120		-		18		2,138		-	NM			NM
Total operating revenues		103,179		94,817		114,110		106,872		112,481		428,280		416,806		9.0	%		2.8	%
Losses and Expenses:
Losses and loss adjustment expenses		66,152		59,922		71,572		68,660		70,671		270,825		263,199		6.8	%		2.9	%
Acquisition expenses		18,027		14,692		19,537		15,923		16,549		66,701		73,747		-8.2	%		-9.6	%
Operating expenses		9,223		5,488		9,979		7,604		13,875		36,946		33,024		50.4	%		11.9	%
Dividends to policyholders		1,916		882		1,493		1,169		2,762		6,306		7,790		44.2	%		-19.1	%
Total losses and expenses		95,318		80,984		102,581		93,356		103,857		380,778		377,760		9.0	%		0.8	%
Operating income before income taxes
and interest expense		7,861		13,833		11,529		13,516		8,624		47,502		39,046		9.7	%		21.7	%
Interest expense		247		214		188		191		196		789		1,001		-20.6	%		-21.2	%
Pre-tax operating income	$	7,614	$	13,619	$	11,341	$	13,325	$	8,428	$	46,713	$	38,045		10.7	%		22.8	%

15

PMA Capital Corporation
Insurance Ratios - PMA Insurance Group
	4th Quarter 2007			1st Quarter 2008			2nd Quarter 2008			3rd Quarter 2008			4th Quarter 2008			Twelve Months 2008			Twelve Months 2007			Point Chg. 4th Quarter Better (Worse)			Point Chg. Twelve Months Better (Worse)
Loss and LAE ratio		70.5	%		69.9	%		69.4	%		70.0	%		68.1	%		69.3	%		69.5	%		2.4			0.2
Expense ratio:
Acquisition expenses		19.2	%		17.1	%		19.0	%		16.2	%		15.9	%		17.1	%		19.4	%		3.3			2.3
Operating expenses		9.9	%		6.5	%		9.7	%		7.8	%		13.3	%		9.5	%		8.7	%		(3.4	)		(0.8	)
Total expense ratio		29.1	%		23.6	%		28.7	%		24.0	%		29.2	%		26.6	%		28.1	%		(0.1	)		1.5
Policyholders' dividend ratio		2.0	%		1.0	%		1.4	%		1.2	%		2.7	%		1.6	%		2.1	%		(0.7	)		0.5
Combined ratio		101.6	%		94.5	%		99.5	%		95.2	%		100.0	%		97.5	%		99.7	%		1.6			2.2
Net investment income ratio		-10.0	%		-10.6	%		-8.7	%		-8.9	%		-8.3	%		-9.1	%		-10.0	%		(1.7	)		(0.9	)
Operating ratio		91.6	%		83.9	%		90.8	%		86.3	%		91.7	%		88.4	%		89.7	%		(0.1	)		1.3

16

PMA Capital Corporation
Components of Direct Premiums Written - PMA Insurance Group
(Dollar Amounts in Thousands)
	1st			2nd			3rd			4th			Twelve
	Quarter			Quarter			Quarter			Quarter			Months
	2006			2006			2006			2006			2006
Direct premium production	$	127,138		$	92,932		$	126,858		$	78,751		$	425,679
Fronting premiums		-			-			2,086			12,704			14,790
Premium adjustments		435			(498	)		(1,452	)		(7,327	)		(8,842	)
Direct premiums written	$	127,573		$	92,434		$	127,492		$	84,128		$	431,627
	1st			2nd			3rd			4th			Twelve
	Quarter			Quarter			Quarter			Quarter			Months
	2007			2007			2007			2007			2007
Direct premium production	$	143,389		$	96,316		$	137,144		$	83,103		$	459,952
Fronting premiums		18,401			14,936			13,707			12,796			59,840
Premium adjustments		(859	)		(134	)		(4,149	)		(4,327	)		(9,469	)
Direct premiums written	$	160,931		$	111,118		$	146,702		$	91,572		$	510,323
	1st			2nd			3rd			4th			Twelve
	Quarter			Quarter			Quarter			Quarter			Months
	2008			2008			2008			2008			2008
Direct premium production	$	146,608		$	96,736		$	150,547		$	112,296		$	506,187
Fronting premiums		8,143			2,113			2,776			21,800			34,832
Premium adjustments		(14,198	)		370			(5,008	)		(4,261	)		(23,097	)
Direct premiums written	$	140,553		$	99,219		$	148,315		$	129,835		$	517,922

17

PMA Capital Corporation
Statements of Operations - Fee-based Business 1
(Dollar Amounts in Thousands)
	4th		1st		2nd		3rd		4th		Twelve		Twelve		% Change			% Change
	Quarter		Quarter		Quarter		Quarter		Quarter		Months		Months		4th			Twelve
	2007		2008		2008		2008		2008		2008		2007		Quarter			Months
Revenues:
Claims service revenues	$	11,239	$	12,108	$	13,213	$	15,951	$	17,029	$	58,301	$	34,034		51.5	%		71.3	%
Commission income		3,005		4,281		2,644		2,662		2,848		12,435		3,005		-5.2	%	NM
Net investment income		435		161		118		118		143		540		972		-67.1	%		-44.4	%
Other revenues		113		102		82		91		59		334		113		-47.8	%	NM
Total operating revenues		14,792		16,652		16,057		18,822		20,079		71,610		38,124		35.7	%		87.8	%
Expenses:
Operating expenses		13,123		14,466		14,856		16,893		18,190		64,405		34,400		38.6	%		87.2	%
Total expenses		13,123		14,466		14,856		16,893		18,190		64,405		34,400		38.6	%		87.2	%
Pre-tax operating income	$	1,669	$	2,186	$	1,201	$	1,929	$	1,889	$	7,205	$	3,724		13.2	%		93.5	%

1 Beginning in the third quarter of 2008, the operating results for this segment also include those of PMA Management Corp. of New England, which was acquired by the Company on June 30, 2008.

18

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
	2007			2008			2008			2008			2008			2008			2007			Quarter			Months
Gross Premiums Written	$	(156	)	$	(122	)	$	(127	)	$	(122	)	$	(123	)	$	(494	)	$	(627	)		21.2	%		21.2	%
Net Premiums Written	$	(156	)	$	(122	)	$	(127	)	$	(122	)	$	(123	)	$	(494	)	$	(627	)		21.2	%		21.2	%
Revenues:
Net premiums earned	$	(156	)	$	(122	)	$	(127	)	$	(122	)	$	(123	)	$	(494	)	$	(627	)		21.2	%		21.2	%
Claims service revenues		-			(156	)		(276	)		(255	)		(244	)		(931	)		-		NM			NM
Commission income		-			-			(13	)		(25	)		(13	)		(51	)		-		NM			NM
Net investment income		132			175			(21	)		(24	)		(32	)		98			684		NM				-85.7	%
Other revenues		55			44			12			34			279			369			227		NM				62.6	%
Total operating revenues		31			(59	)		(425	)		(392	)		(133	)		(1,009	)		284		NM			NM
Expenses:
Acquisition expenses		-			-			(13	)		(25	)		(28	)		(66	)		-		NM			NM
Operating expenses		2,283			2,379			2,512			2,409			2,314			9,614			9,117			1.4	%		5.5	%
Total expenses		2,283			2,379			2,499			2,384			2,286			9,548			9,117			0.1	%		4.7	%
Operating loss before income
taxes and interest expense		(2,252	)		(2,438	)		(2,924	)		(2,776	)		(2,419	)		(10,557	)		(8,833	)		-7.4	%		-19.5	%
Interest expense		2,751			2,573			2,500			2,543			2,478			10,094			10,731			-9.9	%		-5.9	%
Pre-tax operating loss	$	(5,003	)	$	(5,011	)	$	(5,424	)	$	(5,319	)	$	(4,897	)	$	(20,651	)	$	(19,564	)		2.1	%		-5.6	%

19

PMA Capital Corporation
Statements of Operations - Discontinued Operations
(Dollar Amounts in Thousands)
	4th			1st			2nd			3rd			4th			Twelve			Twelve			% Change			% Change
	Quarter			Quarter			Quarter			Quarter			Quarter			Months			Months			4th			Twelve
	2007			2008			2008			2008			2008			2008			2007			Quarter			Months
Gross Premiums Written	$	(301	)	$	2,331		$	(214	)	$	417		$	3		$	2,537		$	4,803		NM				-47.2	%
Net Premiums Written	$	680		$	2,439		$	(227	)	$	167		$	2		$	2,381		$	5,385			-99.7	%		-55.8	%
Revenues:
Net premiums earned	$	656		$	1,026		$	11		$	517		$	145		$	1,699		$	3,471			-77.9	%		-51.1	%
Net investment income		60			128			(451	)		(663	)		1,546			560			2,844		NM				-80.3	%
Total operating revenues		716			1,154			(440	)		(146	)		1,691			2,259			6,315		NM				-64.2	%
Losses and Expenses:
Losses and loss adjustment expenses		274			9,280			550			10,201			4,226			24,257			24,013		NM				1.0	%
Acquisition expenses		239			85			168			(146	)		339			446			891			41.8	%		-49.9	%
Operating expenses		2,111			2,782			1,952			2,054			2,228			9,016			7,507			5.5	%		20.1	%
Impairment charge / valuation adjustment		61,482			(6,480	)		(3,550	)		(8,594	)		8,722			(9,902	)		61,482			-85.8	%	NM
Total losses and expenses		64,106			5,667			(880	)		3,515			15,515			23,817			93,893			-75.8	%		-74.6	%
Pre-tax operating income (loss) from discontinued operations		(63,390	)		(4,513	)		440			(3,661	)		(13,824	)		(21,558	)		(87,578	)		78.2	%		75.4	%
Income tax expense (benefit)		(22,187	)		(1,580	)		154			(1,281	)		(4,838	)		(7,545	)		(30,653	)		78.2	%		75.4	%
After-tax operating income (loss) from discontinued operations		(41,203)			(2,933)			286			(2,380)			(8,986)			(14,013)			(56,925)			78.2%			75.4%
Realized gains (losses) after tax		457			494			(474	)		70			1,146			1,236			(352	)	NM			NM
Loss from discontinued operations	$	(40,746	)	$	(2,439	)	$	(188	)	$	(2,310	)	$	(7,840	)	$	(12,777	)	$	(57,277	)		80.8	%		77.7	%
Note: The net results from discontinued operations are reported as a separate line item below "Income from continuing operations" in the consolidated statements of operations.

20

PMA Capital Corporation

Operating Cash Flows - Consolidated

(Dollar Amounts in Thousands)

	4th			1st			2nd			3rd			4th			Twelve			Twelve
	Quarter			Quarter			Quarter			Quarter			Quarter			Months			Months
	2007			2008			2008			2008			2008			2008			2007
Receipts:
Premiums collected	$	95,709		$	93,222		$	94,883		$	112,274		$	96,678		$	397,057		$	375,149
Claims service, commissions and other revenues		19,473			14,097			16,180			22,643			16,251			69,171			42,205
Investment income received		10,730			10,623			9,418			9,688			9,172			38,901			41,820
Total receipts		125,912			117,942			120,481			144,605			122,101			505,129			459,174
Disbursements:
Losses and LAE paid:
Losses and LAE paid - current year		24,466			4,991			17,075			25,618			30,952			78,636			64,780
Losses and LAE paid - prior years		34,968			61,577			54,638			46,851			41,207			204,273			210,418
Total losses and LAE paid		59,434			66,568			71,713			72,469			72,159			282,909			275,198
Operating expenses paid		36,995			44,966			43,369			43,785			37,866			169,986			135,398
Commissions and premiums paid		7,792			922			2,117			3,387			580			7,006			7,792
Policyholders' dividends paid		791			1,138			1,882			1,663			1,592			6,275			3,858
Interest on corporate debt		3,396			2,926			2,680			2,700			2,645			10,951			11,812
Total disbursements		108,408			116,520			121,761			124,004			114,842			477,127			434,058
Net other		793			(5,637	)		12,080			(6,158	)		(691	)		(406	)		(5,468	)
Net operating cash flows from continuing operations		18,297			(4,215	)		10,800			14,443			6,568			27,596			19,648
Net operating cash flows from discontinued operations		143,177	1		(31,345	)		(23,228	)		(13,236	)		(20,948	)		(88,757	)		67,180	1
Net operating cash flows	$	161,474		$	(35,560	)	$	(12,428	)	$	1,207		$	(14,380	)	$	(61,161	)	$	86,828

1 Includes $172 million received for commutation of adverse development cover reinsurance.

21

PMA Capital Corporation

Operating Cash Flows - PMA Insurance Group

(Dollar Amounts in Thousands)

	4th			1st			2nd		3rd			4th			Twelve			Twelve
	Quarter			Quarter			Quarter		Quarter			Quarter			Months			Months
	2007			2008			2008		2008			2008			2008			2007
Receipts:
Premiums collected	$	95,709		$	93,222		$	94,883	$	112,274		$	96,678		$	397,057		$	375,149
Investment income received		10,292			10,462			9,300		9,570			9,029			38,361			40,845
Total receipts		106,001			103,684			104,183		121,844			105,707			435,418			415,994
Disbursements:
Losses and LAE paid:
Losses and LAE paid - current year		24,466			4,991			17,075		25,618			30,952			78,636			64,780
Losses and LAE paid - prior years		34,968			61,577			54,638		46,851			41,207			204,273			210,418
Total losses and LAE paid		59,434			66,568			71,713		72,469			72,159			282,909			275,198
Operating expenses paid		22,146			32,454			28,756		26,531			23,391			111,132			99,144
Policyholders' dividends paid		791			1,138			1,882		1,663			1,592			6,275			3,858
Interest on corporate debt		252			245			186		192			185			808			1,000
Total disbursements		82,623			100,405			102,537		100,855			97,327			401,124			379,200
Net other		(15,631	)		(3,412	)		10,964		(6,659	)		(18,635	)		(17,742	)		(31,460	)
Net operating cash flows	$	7,747		$	(133	)	$	12,610	$	14,330		$	(10,255	)	$	16,552		$	5,334

22

PMA Capital Corporation

Operating Cash Flows - Fee-based Business 1

(Dollar Amounts in Thousands)

	4th			1st		2nd			3rd		4th		Twelve		Twelve
	Quarter			Quarter		Quarter			Quarter		Quarter		Months		Months
	2007			2008		2008			2008		2008		2008		2007
Receipts:
Claims service, commissions and other revenues	$	19,473		$	14,097	$	16,180		$	22,643	$	16,251	$	69,171	$	42,205
Investment income received		438			161		118			118		143		540		975
Total receipts		19,911			14,258		16,298			22,761		16,394		69,711		43,180
Disbursements:
Operating expenses paid		14,849			12,512		14,613			17,254		14,475		58,854		36,254
Commissions and premiums paid		7,792			922		2,117			3,387		580		7,006		7,792
Total disbursements		22,641			13,434		16,730			20,641		15,055		65,860		44,046
Net other		(48	)		977		(3,003	)		970		3,850		2,794		(3,629	)
Net operating cash flows	$	(2,778	)	$	1,801	$	(3,435	)	$	3,090	$	5,189	$	6,645	$	(4,495	)

1 Beginning in the third quarter of 2008, the operating cash flows for this segment also include those of PMA Management Corp. of New England, which was acquired by the Company on June 30, 2008.

23

PMA Capital Corporation
Statutory Surplus
(Dollar Amounts in Thousands)
	4th		1st		2nd		3rd		4th
	Quarter		Quarter		Quarter		Quarter		Quarter
	2007		2008		2008		2008		20081
PMA Pool 2	$	335,394	$	343,582	$	352,096	$	336,368	$	332,915
PMA Capital Insurance Company		47,580		41,099		37,838		26,143		34,468

PMA Capital Corporation

Statutory Financial Information - PMA Pool  2

(Dollar Amounts in Thousands)

	4th			1st			2nd			3rd			4th			Twelve			Twelve
	Quarter			Quarter			Quarter			Quarter			Quarter			Months			Months
	2007			2008			2008			2008			20081			20081			2007
Net Premiums Written:
Workers' Compensation	$	64,477		$	103,018		$	71,998		$	107,446		$	87,722		$	370,184		$	352,644
Other Commercial Lines		6,139			10,805			9,079			8,692			8,154			36,730			33,656
Total - PMA Pool	$	70,616		$	113,823		$	81,077		$	116,138		$	95,876		$	406,914		$	386,300
Statutory Ratios:
Loss and LAE ratio		70.4	%		69.6	%		69.5	%		69.4	%		67.7	%		69.0	%		70.0	%
Underwriting expense ratio		34.6	%		20.3	%		32.1	%		22.1	%		26.9	%		24.8	%		26.9	%
Policyholders' dividend ratio		2.1	%		1.4	%		1.5	%		1.4	%		3.3	%		1.9	%		1.4	%
Combined ratio		107.1	%		91.3	%		103.1	%		92.9	%		97.9	%		95.7	%		98.3	%
Operating ratio		97.2	%		80.7	%		94.4	%		84.0	%		89.5	%		86.6	%		88.6	%

1	Estimated.
2	The PMA Pool is comprised of Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company and Pennsylvania Manufacturers Indemnity Company.

24

PMA Capital Corporation
Industry Ratings and Market Information
Transfer Agent and Registrar:	Inquiries:
American Stock Transfer & Trust Company	William E. Hitselberger
Shareholder Relations	Chief Financial Officer
59 Maiden Lane – Plaza Level	610.397.5083
New York, NY 10038	email: bhitselberger@pmacapital.com
www.amstock.com
	Investor Relations
Phone Inquiries:	610.397.5298
800.937.5449	email: investorrelations@pmacapital.com
Email Inquiries:	Company Website:
info@amstock.com	www.pmacapital.com
Securities Listing:
The Corporation's Class A Common Stock is listed
on the NASDAQ Stock Market®.  It trades under
the stock symbol: PMACA.

Financial Strength Ratings (as of 2/18/2009):
	A.M. Best	Fitch	Moody's
PMA Pool 1	A-   (4th of 16)	BBB+  (8th of 21)	Baa3  (10th of 21)
PMA Capital Insurance Company 2	C++  (9th of 16)	NR 3	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 in run-off.  On April 1, 2008, we announced that we executed a definitive stock purchase agreement to sell our Run-off Operations to Armour Reinsurance Group Limited. The closing of the sale and transfer of ownership are currently pending approval by the Pennsylvania Insurance Department.
3  NR - Not Rated.

25