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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 17, 2006 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and assigned an issuer credit rating (ICR) of "a-" of The PMA Insurance Group (Blue Bell, PA). The outlook for these ratings is stable. At the same time, A.M. Best has affirmed the FSR of B+ (Very Good) and the ICR of "bbb-" of PMA Capital Insurance Company (PMACIC a/k/a PMA Re) (Philadelphia, PA). PMACIC has been assigned a negative outlook, which is reflective of the projected weakening of capital driven by the intention of its parent, PMA Capital Corporation (PMA Capital) (Blue Bell, PA) [NASDAQ: PMACA], to withdraw a significant extraordinary dividend during the second quarter of 2006, subject to state insurance department approval, as well as increased commutation efforts.
A.M. Best has also affirmed debt ratings of "bb" on the senior secured convertible debentures and affirmed the ICR of "bb" of PMA Capital.
Additionally, A.M. Best has affirmed the remaining debt and indicative ratings of PMA Capital and PMA Capital Trust I and II. All ratings have been affirmed with a stable outlook. (See link below for complete rating detail.)
The affirmation of The PMA Insurance Group's FSRs recognizes the company's supportive stand-alone statutory capitalization, strong regional workers' compensation market presence and modest operating profitability. Given recent softening market conditions, A.M. Best maintains some concern with the group's ability to improve upon its current operating performance. Also, as PMA Capital's only ongoing business segment, the group's capitalization and operating performance could potentially be impacted by holding company obligations, including debt servicing and potential issues that may arise from the run-off operation. Despite these concerns, the outlook reflects the group's supportive capitalization, more stringent underwriting initiatives focused on less hazardous classes of business and proactive claims management.
The affirmation of PMACIC's FSR reflects its current strong stand-alone statutory capitalization, the additional protection of an adverse development cover and A.M Best's expectation that its operations will run-off adequately. Concerns driving the negative outlook include the intention of the company's parent to withdraw capital during the second quarter of 2006 in the form of an extraordinary dividend; any extraordinary dividend is subject to state insurance department approval. In addition, the potential change in capital protection due to the contractual provision - which allows for the commutation of the existing adverse development cover in 2007 - would weaken projected capitalization and increase the execution risk associated with its run-off plan.
The debt ratings of PMA Capital reflect its improved financial flexibility following the recent corporate restructuring. In addition, dividend dependence was significantly reduced in 2006 following the restructuring of the convertible debt.
For a complete listing of PMA Capital Corp and its operating companies' FSRs, ICRs and debt ratings, please visit PMA Capital.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.