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): November 3, 1999
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PMA Capital Corporation
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(Exact name of registrant as specified in its charter)
Pennsylvania 000-22761 23-2217932
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1735 Market Street, Suite 2800
Philadelphia, Pennsylvania 19103-7590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 665-5046
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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A. On November 3, 1999, the registrant issued a news release, a copy of
which is filed as Exhibit 99 hereto and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
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(c) The exhibit accompanying this report is listed in the Index to
Exhibits on the following page.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PMA Capital Corporation
Date: November 4, 1999 By:/s/ Francis W. McDonnell
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Francis W. McDonnell,
Senior Vice President,
Chief Financial Officer
and Treasurer
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Index to Exhibits
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Number Description Method of Filing
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99 PMA Capital Corporation Filed herewith
news release dated
November 3, 1999
[GRAPHIC OMITTED]
PMA Capital
A Specialty Risk Management Company
Mellon Bank Center Suite 2800
1735 Market Street
Philadelphia, PA 19103-7590 PRESS RELEASE
For Release: Immediate
Contact: Albert D. Ciavardelli
(215) 665-5063
PMA Capital Announces 13% Increase in
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Third Quarter 1999 Operating Income per Share
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PMA Capital's Board of Directors Approves Additional $30 Million in
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Share Repurchase Authority and Declares Quarterly Dividend
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Philadelphia, PA, November 3, 1999 -- PMA Capital (NASDAQ: PMACA) today
announced that third quarter 1999 after-tax operating income (net income
excluding after-tax net realized investment gains and losses) increased 10% to
$8.6 million, compared with $7.9 million for the third quarter of 1998. On a per
share basis, operating income improved 13% to $0.36 per diluted share, compared
with $0.32 per diluted share for the same period last year. For the first nine
months of 1999, after-tax operating income increased 11% to $24.4 million,
compared with $22.0 million for the same period last year. Operating income per
share for the first nine months of 1999 improved 15% to $1.02 per diluted share
up from $0.89 per diluted share for the same period last year.
The improvements in operating income for the quarter and first nine months of
1999 reflect improved underwriting results, partially offset by a higher
effective tax rate in 1999. After-tax operating income per share also benefited
from the favorable effect of share repurchase activities during the past two
years.
Net premiums written for the third quarter of 1999 increased 4% to $125.0
million, compared with $120.7 million for the third quarter of 1998. Net
premiums written for the first nine months of 1999 increased 7% to $395.4
million, compared with $369.1 million for the same period last year.
"Throughout 1999, operating income has benefited from premium growth and solid
underwriting performance, and together with share repurchase activities, our
after-tax operating income per share has improved by 10% or better in each of
the first three quarters of 1999, compared with last year. The premium growth
and improvements in operating results are the product of sound
<PAGE>
execution of our business plans and related performance objectives that we
established for each of PMA Capital's three specialty insurance businesses,"
said John W. Smithson, President and Chief Executive Officer of PMA Capital.
"PMA Re continues to be a solid and stable contributor to both premiums and
operating results reflecting success in expanding product offerings to clients.
The PMA Insurance Group has experienced measurable improvement in its operating
results, compared with last year, due to disciplined underwriting and expense
controls. Caliber One, which is only in its second year of operation in the
excess and surplus lines business, has contributed nicely to our premium growth
in 1999."
Net Income
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Net income for the third quarter of 1999 was $6.5 million, or $0.27 per diluted
share, compared with $10.6 million, or $0.43 per diluted share, for the
comparable period of 1998. Net income for the first nine months of 1999 was
$19.0 million, or $0.79 per diluted share, compared with $32.0 million, or $1.30
per diluted share, for the same period last year.
Included in net income for the quarter and nine months ended September 30, 1999
were after-tax net realized investment losses of $2.1 million and $2.7 million,
respectively, compared with after-tax gains of $2.7 million and $10.0 million
for the same periods last year. Net realized investment losses in 1999
principally resulted from sales of investments during the second and third
quarters of 1999 in order to invest in yield enhancing investment opportunities.
Net income for the first nine months of 1999 was also impacted by an after-tax
charge of $2.8 million for the implementation of the new accounting rule for
insurance-related assessments.
PMA Re
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PMA Capital's property and casualty reinsurance operations, PMA Re, reported
pre-tax operating income of $14.7 million for the third quarter of 1999,
compared with $11.9 million for the same period last year. For the first nine
months of 1999, pre-tax operating income was $37.8 million, compared with $34.9
million for the same period last year. The increase in operating results for the
third quarter of 1999 reflects a decrease in underwriting losses, due to a lower
expense ratio partially offset by a higher loss ratio, and an increase in
investment income.
PMA Re's net premiums written were $46.0 million in the third quarter of 1999,
compared with $54.7 million for the same period last year. Higher ceded
premiums, the cancellation of a finite treaty and the effects of the highly
competitive conditions in the U.S. reinsurance market more than offset growth
from expanded product offerings. For the first nine months of 1999, net written
premiums increased to $182.6 million, compared with $172.6 million for the same
period of 1998, reflecting the expansion of finite and financial product
offerings, expanding relationships with PMA Re's existing clients, and contracts
with new clients. The effects of the highly competitive conditions in the U.S.
reinsurance market, which has caused PMA Re to non-renew certain accounts
largely due to inadequate rates and/or other underwriting issues, partially
offset this increase.
PMA Re's combined ratio, as computed using generally accepted accounting
principles (GAAP), was 100.4% for the third quarter of 1999, compared with
103.2% for the same period last year. For the first nine months of 1999, the
GAAP combined ratio was 102.5%, compared with 103.8% for the same period last
year.
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The PMA Insurance Group
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The PMA Insurance Group reported pre-tax operating income of $4.2 million for
the third quarter of 1999, compared with $3.0 million for the same period last
year. For the first nine months of 1999, pre-tax operating income was $13.4
million, compared with $8.4 million for the same period last year. The continued
improvement in pre-tax operating results was primarily due to improved loss
experience, reduced net exposures and lower operating expenses resulting from
ongoing cost reduction initiatives.
For the first nine months of 1999, direct workers' compensation premiums written
by The PMA Insurance Group increased 5.8% to $161.8 million, compared with
$153.0 million for the same period last year. This increase principally reflects
the successful execution of focused marketing efforts, partially offset by
manual rate reductions.
The PMA Insurance Group's net premiums written decreased 2% to $63.3 million for
the third quarter of 1999, compared with $64.5 million for the same period last
year. For the first nine months of 1999, net premiums written decreased 6% to
$182.5 million, compared with $194.3 million for the same period last year. The
decreases in net premiums written reflect higher ceded premiums on workers'
compensation business and lower direct premiums for commercial lines other than
workers' compensation, partially offset by the higher level of direct workers'
compensation premiums.
The PMA Insurance Group's GAAP combined ratio, excluding Run-off Operations (see
discussion below), was 114.9% and 113.9% for the third quarter and first nine
months of 1999, respectively, compared with 117.1% and 117.2% for the comparable
periods last year.
The PMA Insurance Group's investment income, excluding Run-off Operations,
decreased by $1.8 million and $3.6 million for the third quarter and first nine
months of 1999, compared with the same periods last year, due largely to a lower
invested asset base.
The PMA Insurance Group previously established run-off operations for the
purpose of reinsuring certain obligations primarily associated with workers'
compensation claims for the years 1991 and prior (the "Run-off Operations"). For
the third quarter and first nine months of 1999, Run-off Operations had pre-tax
operating income of $174,000 and pre-tax operating losses of $320,000, compared
with pre-tax operating losses of $387,000 and pre-tax operating income of
$41,000 for the same periods last year.
Caliber One
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Caliber One commenced writing excess and surplus lines business in January 1998.
As a result of the start-up nature of this operation, expenses have exceeded
revenues in each quarter that Caliber One has been in business through June 30,
1999. However, in the third quarter of 1999, Caliber One recorded pre-tax
operating income of $462,000 reflecting the establishment of a sizeable premium
base and stabilization of its expenses relative to that premium base. For the
third quarter of 1998, Caliber One had pre-tax operating losses of $247,000.
Caliber One recorded pre-tax operating losses of $839,000 and $1.3 million for
the first nine months of 1999 and 1998, respectively.
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<PAGE>
Caliber One's net premiums written for the third quarter of 1999 were $15.8
million, compared with $1.7 million for the same period last year. For the first
nine months of 1999, net premiums written were $30.7 million, compared with $2.6
million for the first nine months of 1998.
Corporate and Other
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The Corporate and Other segment includes unallocated investment income;
expenses, including debt service; and taxes, as well as the results of certain
of the Company's real estate properties. For the third quarters of 1999 and
1998, pre-tax operating losses for this segment were $5.7 million and $6.2
million, respectively. For the first nine months of 1999 and 1998, pre-tax
operating losses were $16.3 million and $19.2 million, respectively. The
reduction in operating losses for the third quarter and first nine months of
1999 mainly reflects lower interest expense due to the $40 million reduction in
outstanding debt in the fourth quarter of 1998.
Financial Position
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Total assets were $3.3 billion as of September 30, 1999, compared with $3.5
billion as of December 31, 1998. Shareholders' equity was $451.9 million as of
September 30, 1999, compared with $511.5 million as of December 31, 1998. The
decrease in shareholders' equity reflects a $58.3 million reduction in after-tax
unrealized appreciation on fixed maturity investments due to an increase in
interest rates since year-end 1998. Book value per share, excluding unrealized
gains and losses, was $21.08 as of September 30, 1999, compared with $20.61 as
of December 31, 1998.
Share Repurchase Plan
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During the first nine months of 1999, PMA Capital repurchased 999,000 shares of
its Class A Common Stock at a cost of approximately $19.7 million (average per
share price was $19.71). Since the inception of its share repurchase program in
February 1998, PMA Capital has repurchased a total of 2.0 million shares at a
total cost of $38.5 million (average per share price was $19.32).
The Board of Directors authorized an additional $30 million of share repurchase
authority at its meeting earlier today, which brings PMA Capital's remaining
share repurchase authorization to approximately $36 million as of November 3,
1999.
Quarterly Dividends
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On November 3, 1999, PMA Capital's Board of Directors declared regular quarterly
dividends on its Class A Common Stock of $0.09 per share and on its Common Stock
of $0.08 per share to shareholders of record on December 20, 1999. The dividends
will be paid on January 7, 2000. PMA Capital has paid consecutive quarterly
dividends to its shareholders for the past 83 years.
PMA Capital Corporation, headquartered in Philadelphia, Pennsylvania, is an
insurance holding company, whose operating subsidiaries provide specialty risk
management products and services to customers throughout the United States. The
primary product lines of PMA Capital's subsidiaries include: 1) property and
casualty reinsurance, underwritten and marketed through PMA Re; 2) managed care
workers' compensation, integrated disability and other commercial property and
casualty lines of insurance in the Mid-Atlantic and Southern regions of the
United States, underwritten and marketed under the trade name The PMA Insurance
Group; and 3) excess and surplus lines coverages, underwritten and marketed by
Caliber One.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this release and oral statements made by individuals
authorized to speak on behalf of PMA Capital Corporation (the "Company") that
are not historical facts are forward-looking statements and are based on
estimates, assumptions and projections. Actual results may differ materially
from those projected in the forward-looking statements. These forward-looking
statements are based on currently available financial, competitive and economic
data and the Company's current operating plans based on assumptions regarding
future events. The Company's actual results could differ materially from those
expected by the Company's management. The factors that could cause actual
results to vary materially, some of which are described with the forward-looking
statements, include, but are not limited to, changes in general economic
conditions, including the performance of financial markets and interest rates;
regulatory or tax changes, including changes in risk-based capital or other
regulatory standards that affect the ability of the Company to conduct its
business; competitive or regulatory changes that affect the cost of or demand
for the Company's products; the Company's ability to meet its marketing
objectives; the effect of changes in workers' compensation statutes and their
administration; the Company's ability to predict and effectively manage claims
related to insurance and reinsurance policies; reliance on key management;
adequacy of reserves for claim liabilities; adverse property and casualty loss
development for events the Company insured in prior years; adequacy and
collectibility of reinsurance purchased by the Company; severity of natural
disasters and other catastrophes; and other factors disclosed from time to time
in reports filed by the Company with the Securities and Exchange Commission.
Investors should not place undue reliance on any such forward-looking
statements.
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<PAGE>
PMA Capital Corporation
Financial Data
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Sept. 30, Nine months ended Sept. 30,
Income Statement Data: 1999 1998 1999 1998
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Net premiums written:
<S> <C> <C> <C> <C>
PMA Re $ 45,963 $ 54,687 $182,628 $ 172,595
The PMA Insurance Group 63,289 64,504 182,472 194,331
Caliber One 15,828 1,660 30,681 2,577
Corporate and other (110) (198) (363) (369)
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Consolidated $124,970 $ 120,653 $395,418 $ 369,134
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Revenues:
Net premiums earned:
PMA Re (1) $ 68,941 $ 56,386 $191,289 $ 157,353
The PMA Insurance Group 51,691 57,389 161,416 177,978
Caliber One 7,897 440 14,540 631
Corporate and other (110) (198) (363) (369)
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Consolidated Net premiums earned 128,419 114,017 366,882 335,593
Net Investment Income 28,029 28,410 82,099 92,260
Realized Gains (Losses) (3,283) 4,099 (4,161) 15,362
Other Revenues 2,869 2,945 8,828 9,385
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Consolidated Revenues $156,034 $ 149,471 $453,648 $ 452,600
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Components of operating income (loss) (2):
PMA Re $ 14,674 $ 11,930 $ 37,790 $ 34,882
The PMA Insurance Group 4,219 3,002 13,399 8,384
Caliber One 462 (247) (839) (1,317)
Corporate and other (5,703) (6,200) (16,292) (19,211)
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Pre-tax operating income $13,652 $ 8,485 $34,058 $ 22,738
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After-tax operating income $ 8,646 $ 7,888 $24,431 $ 22,012
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Net income $ 6,512 $ 10,552 $18,967 $ 31,997
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Weighted Average Common Shares Outstanding:
Basic 22,898,574 23,573,472 23,098,368 23,704,376
Diluted 23,708,233 24,616,577 23,918,756 24,649,404
After-tax Operating Income Per Share:
Basic $ 0.38 $ 0.34 $ 1.06 $ 0.93
======== ========= ======== =========
Diluted $ 0.36 $ 0.32 $ 1.02 $ 0.89
======== ========= ======== =========
Net Income Per Share:
Basic $ 0.28 $ 0.45 $ 0.82 $ 1.35
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Diluted $ 0.27 $ 0.43 $ 0.79 $ 1.30
======== ========= ======== =========
Balance Sheet Data: Sept. 30, 1999 December 31, 1998
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Total Assets $ 3,295,410 $ 3,460,718
Shareholders' Equity $ 451,909 $ 511,480
Shareholders' Equity per Share (including FAS 115) $ 19.84 $ 21.90
Shareholders' Equity per Share (excluding FAS 115) $ 21.08 $ 20.61
</TABLE>
(1) PMA Re's earned premiums for the third quarter and first nine months of
1999 include approximately $26 million reflecting a revision in the
estimate of unearned premiums on in-force contracts.
(2) Pre-tax operating income (loss) represents pre-tax income (loss) from
continuing operations, but excluding net realized investment gains
(losses). After-tax operating income (loss) is net income (loss) excluding
after-tax net realized investment gains (losses).
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