A.M. Best Lowers Ratings of PMA Capital.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 25, 2003 A.M. Best Co. has lowered the financial strength rating to A- (Excellent) from A (Excellent) of PMA PMA (papillary-marginal-attached), n a system of epidemiologic scoring of periodontal disease devised by Schour and Massler in which the symbols denote the areas involved in gingival inflammation. PMA Progressive muscular atrophy Capital Insurance Company (Pennsylvania) with a stable outlook. The current financial strength rating of A- (Excellent) with a stable outlook of PMA Insurance Group (Pennsylvania) has been affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. . The indicative senior debt rating assigned to PMA Capital Corporation's (PMA Capital) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : PMACA) $86.3 million convertible senior debentures due to mature in 2022, issued under the company's existing $250 million universal shelf registration, has been lowered to "bbb-" with a stable outlook from "bbb" with a negative outlook. A.M. Best has also lowered the indicative ratings for other securities which may be issued under the shelf, including senior debt to "bbb-" from "bbb"; subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". to "bb+" from "bbb-"; preferred securities (PMA Capital Trust I and PMA Capital Trust II) to "bb+" from "bbb-"; and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. to "bb" from "bb+". All have stable outlooks. These rating actions follow PMA Capital's fourth-quarter 2002 earnings release in which the corporation announced a $10.4 million net loss for the quarter and a $48.0 million net loss for the year. This included a $26 million after-tax loss reserve charge in the fourth quarter in its reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. operations for higher than expected underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. losses on business from 1998-2000. The current ratings reflect the reduced flexibility PMA Capital has in addressing any future earnings surprises and capital needs. Given the reserve charges during the year and the company's strong growth in 2002, capitalization needs and financial flexibility are a priority, and several options are being explored. While the potential for further adverse loss reserve development exists, A.M. Best expects PMA Capital's current reinsurance and workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. business will prove to be more profitable over the next few years, helping to bolster capitalization, which while adequate, provides little flexibility for growth or additional surprises. In 2002, PMA Capital closed on a new credit facility to replace its existing $62.5 million credit facility. The new bank facility automatically renews in one year, contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the corporation meeting financial goals related to earnings and surplus. Given the latest announcement, A.M. Best believes PMA Capital may not be able to meet its financial goals to automatically renew the current credit facility in 2003. As the financial flexibility and liquidity of the holding company remain concerns, A.M. Best will continue to monitor PMA Capital's replacement of the credit facility with a more permanent capital structure. The ratings outlook for PMA Capital is stable; however, it reflects A.M. Best's expectation that the credit facility will be replaced or restructured in the near term. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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