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): August 4, 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)
<PAGE>
5. Other Events.
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A. On August 4, 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: August 4, 1999 By: /s/ Francis W. McDonnell
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Francis W. McDonnell,
Senior Vice President, Chief Financial
Officer and Treasurer
<PAGE>
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
August 4, 1999
Exhibit 99
[PMA CAPITAL LETTERHEAD]
Mellon Bank Center Suite 2800
1735 Market Street
Philadelphia, PA 19103-7590 PRESS RELEASE
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For Release: Immediate
Contact: Albert D. Ciavardelli
(215) 665-5063
PMA Capital Corporation Reports Second Quarter 1999 Results
and Declares Quarterly Dividend
Continued Premium Growth and Improvement in Operating Income
Quarterly Operating Income per share Increased 18%
Philadelphia, PA, August 4, 1999 -- PMA Capital (NASDAQ: PMACA) today reported
second quarter 1999 after-tax operating income (net income excluding after-tax
net realized investment gains and losses) of $7.9 million, or $0.33 per diluted
share, compared with $6.9 million, or $0.28 per diluted share, for the second
quarter of 1998.
For the first six months of 1999, after-tax operating income was $15.8 million,
or $0.66 per diluted share, compared with $14.1 million, or $0.57 per diluted
share, for the same period last year. Operating income for the second quarter
and first six months of 1999 increased 14% and 12%, respectively, over the same
periods last year due primarily to improved underwriting results, partially
offset by a higher effective tax rate in 1999. Operating income on a per share
basis increased 18% and 16% for the second quarter and first six months of 1999,
respectively, reflecting the factors noted above as well as the favorable effect
of share repurchases.
Net premiums written for the second quarter of 1999 increased 7% to $101.9
million, compared with $94.9 million for the second quarter of 1998. Net
premiums written for the first six months of 1999 increased 9% to $270.4
million, compared with $248.5 million for the same period last year.
"The collective performance of our three specialty insurance businesses in the
second quarter was solid. I am pleased with our ability to sustain an increasing
level of written premiums through expanded product offerings at PMA Re and
Caliber One," said John W. Smithson, President and Chief Executive Officer of
PMA Capital. "The organic growth of our businesses and our commitment to
underwriting discipline have contributed to the improvement in our results.
Specifically, the year-over-year improvement in operating income reflects higher
earnings from The PMA Insurance Group and continued stable income from PMA Re.
We continue to be focused on meeting the risk management needs of our customers
and maintaining a strong underwriting discipline in order to achieve our
profitability objectives."
<PAGE>
Net Income
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Net income for the second quarter of 1999 was $6.7 million, or $0.28 per diluted
share, compared with $9.4 million, or $0.38 per diluted share, for the
comparable period of 1998. Net income for the for the first six months of 1999
was $12.5 million, or $0.52 per diluted share, compared with $21.4 million, or
$0.87 per diluted share, for the same period last year.
Included in net income for the quarter and six months ended June 30, 1999 were
after-tax net realized investment losses of $1.1 million and $571,000,
respectively, compared with gains of $2.4 million and $7.3 million for the same
periods last year. Net realized investment losses in 1999 principally resulted
from yield enhancing reinvestment opportunities during the second quarter of
1999.
Net income for the first six 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 reinsurance operations, PMA Re, reported pre-tax operating income
of $10.4 million for the second quarter of 1999, compared with $11.6 million for
the same period last year. For the first six months of 1999, pre-tax operating
income was $23.1 million, compared with $23.0 million for the same period last
year. The decrease in operating results for the second quarter of 1999 reflects
an increase in underwriting losses, due to a higher loss ratio, partially offset
by a lower expense ratio.
PMA Re's net premiums written were $58.3 million in the second quarter of 1999
and $136.7 million for the first six months of 1999, compared with $47.1 million
and $117.9 million, respectively, for the same periods last year. These
increases reflect the successful expansion of finite and financial product
offerings, expanding relationships with PMA Re's existing clients, and contracts
with new clients. Partially offsetting these increases were 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.
PMA Re's combined ratio, as computed using generally accepted accounting
principles (GAAP), was 105.2% for the second quarter of 1999, compared with
103.8% for the same period last year. For the first six months of 1999, the GAAP
combined ratio was 103.7%, compared with 104.2% for the same period last year.
The PMA Insurance Group
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The PMA Insurance Group reported pre-tax operating income of $4.2 million for
the second quarter of 1999, compared with $2.6 million for the same period last
year. For the first six months of 1999, pre-tax operating income was $9.2
million, compared with $5.4 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 six months of 1999, direct workers' compensation premiums written
by The PMA Insurance Group increased 5% to $106.1 million, compared with $101.5
million for the same period last year. This increase principally reflects the
successful execution of focused marketing efforts, partially offset by manual
rate reductions.
2
<PAGE>
The PMA Insurance Group's net premiums written decreased 24% to $36.2 million
for the second quarter of 1999, compared with $47.3 million for the same period
last year. For the first six months of 1999, net premiums written decreased 8%
to $119.2 million, compared with $129.8 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 112.3% and 113.2% for the second quarter and first six
months of 1999, respectively, compared with 117.5% and 117.2% for the comparable
periods last year. These improvements reflect a lower expense ratio and
continued underwriting discipline.
The PMA Insurance Group's investment income, excluding Run-off Operations,
decreased by $1.2 million and $1.8 million for the second quarter and first six
months of 1999, compared with the same periods last year, due largely to a lower
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 second quarter and first six months of 1999, Run-off Operations had pre-tax
operating losses of $560,000 and $494,000, compared with pre-tax operating
income of $293,000 and $428,000 for the same periods last year.
Caliber One
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For the second quarter and first six months of 1999, Caliber One recorded
pre-tax operating losses of $605,000 and $1.3 million, respectively, compared
with losses of $681,000 and $1.1 million for the same periods last year. These
losses reflect the start-up nature of Caliber One, which commenced writing
business in January 1998.
Caliber One's net premiums written for the second quarter of 1999 were $7.5
million, compared with $705,000 for the same period last year. For the first six
months of 1999, net premiums written were $14.9 million, compared with $917,000
for the first six 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 second quarters of 1999 and
1998, pre-tax operating losses for this segment were $5.8 million and $6.5
million, respectively. For the first six months of 1999 and 1998, pre-tax
operating losses were $10.6 million and $13.0 million, respectively. The
reduction in operating losses for the second quarter and first six months of
1999 mainly reflects lower interest expense due to the $40 million pay down of
outstanding debt in the fourth quarter of 1998.
3
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Financial Position
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Total assets were $3.4 billion as of June 30, 1999, compared with $3.5 billion
as of December 31, 1998. Shareholders' equity was $461.8 million as of June 30,
1999, compared with $511.5 million as of December 31, 1998. The decrease in
shareholders' equity reflects a $50.9 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 $20.88 as of June 30, 1999, compared with $20.61 as of December 31,
1998.
Share Repurchase Plan
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During the first six months of 1999, PMA Capital repurchased 627,000 shares of
its Class A Common Stock at a cost of $12.3 million (average per share price was
$19.54). In addition, PMA Capital repurchased 200,000 shares in July 1999 for a
total cost of $4.0 million (average per share price was approximately $20.00).
Since the inception of its share repurchase program in February 1998, PMA
Capital has repurchased a total of 1.8 million shares at a total cost of $35.1
million (average per share price was $19.25). As of August 4, 1999, PMA Capital
has remaining share repurchase authorization of $9.9 million.
Quarterly Dividends
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On August 4, 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 September 10, 1999. The
dividends will be paid on October 1, 1999. PMA Capital has paid consecutive
quarterly dividends to its shareholders for the past 82 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) workers'
compensation 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.
4
<PAGE>
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.
5
<PAGE>
PMA Capital Corporation
Financial Data
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
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Three months ended June 30, Six months ended June 30,
Income Statement Data: 1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Net premiums written:
PMA Re $ 58,338 $ 47,089 $ 136,665 $ 117,908
The PMA Insurance Group 36,162 47,285 119,183 129,827
Caliber One 7,531 705 14,853 917
Corporate and other (100) (171) (253) (171)
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Consolidated $ 101,931 $ 94,908 $ 270,448 $ 248,481
==================================================================
Net premiums earned:
PMA Re $ 69,915 $ 54,869 $ 122,348 $ 100,967
The PMA Insurance Group 55,326 59,791 109,725 120,589
Caliber One 4,000 165 6,643 191
Corporate and other (100) (171) (253) (171)
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Consolidated $ 129,141 $ 114,654 $ 238,463 $ 221,576
==================================================================
Components of operating income (loss) (1):
PMA Re $ 10,367 $ 11,580 $ 23,116 $ 22,952
The PMA Insurance Group 4,195 2,646 9,180 5,382
Caliber One (605) (681) (1,301) (1,070)
Corporate and other (5,821) (6,519) (10,589) (13,011)
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Pre-tax operating income $ 8,136 $ 7,026 $ 20,406 $ 14,253
==================================================================
After-tax operating income $ 7,887 $ 6,920 $ 15,785 $ 14,124
==================================================================
Net income $ 6,746 $ 9,357 $ 12,455 $ 21,445
==================================================================
Weighted Average Common Shares Outstanding:
Basic 23,083,506 23,692,071 23,199,921 23,770,912
Diluted 23,936,717 24,694,456 24,023,214 24,658,911
After-tax Operating Income Per Share:
Basic $ 0.34 $ 0.29 $ 0.68 $ 0.59
==================================================================
Diluted $ 0.33 $ 0.28 $ 0.66 $ 0.57
==================================================================
Net Income Per Share:
Basic $ 0.29 $ 0.39 $ 0.53 $ 0.90
==================================================================
Diluted $ 0.28 $ 0.38 $ 0.52 $ 0.87
==================================================================
Balance Sheet Data: June 30, 1999 December 31, 1998
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Total Assets $ 3,398,772 $ 3,460,718
Shareholders' Equity $ 461,792 $ 511,480
Shareholders' Equity per Share (including FAS 115) $ 19.97 $ 21.90
Shareholders' Equity per Share (excluding FAS 115) $ 20.88 $ 20.61
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<FN>
(1) 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).
</FN>
</TABLE>
