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): May 5, 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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5. Other Events.
A. On May 5, 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.
(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: May 6, 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
May 5, 1999
[PMA CAPITAL LETTERHEAD]
1735 Market Street
Suite 2800
Philadelphia, PA 19103-7590 PRESS RELEASE
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For Release: Immediate
Contact: Albert D. Ciavardelli
(215) 665-5063
PMA Capital Corporation Reports First Quarter 1999 Results
And Declares Quarterly Dividend
Operating Income Rises 14% to $0.33 per share;
10% Growth in Net Premiums Written
Philadelphia, PA, May 5, 1999 -- PMA Capital Corporation (NASDAQ: PMACA) today
reported first quarter 1999 after-tax operating income (net income excluding
after-tax net realized investment gains) of $7.9 million, or $0.33 per diluted
share, compared with $7.2 million, or $0.29 per diluted share, for the same
period last year. This 14% increase in after-tax operating earnings per share
primarily reflects solid growth in net premiums written, improved underwriting
results and the effect of share repurchases, partially offset by a higher
effective tax rate in the first quarter of 1999.
Net income for the first quarter of 1999 was $5.7 million, or $0.24 per diluted
share, compared with $12.1 million, or $0.49 per diluted share, for the first
quarter of 1998. Included in net income for the first quarter of 1999 were
after-tax net realized investment gains of $0.6 million, compared with $4.9
million for the same period last year. Net income for 1999 was also impacted by
an after-tax charge of $2.8 million, or $0.11 per diluted share, for the
required implementation of a new accounting pronouncement for property and
casualty insurance companies regarding insurance-related assessments.
"Our first quarter results showed a solid improvement in net premiums written,
which, along with continued solid underwriting performance and the effect of our
share repurchase program, contributed to the 14% growth in operating earnings
per share this quarter," said John W. Smithson, President and Chief Executive
Officer. "Our three specialty insurance businesses - PMA Re, The PMA Insurance
Group and Caliber One -- continue to execute on our overall strategy to grow
organically as we further our relationships with existing customers and
establish relationships with new customers. Our growth reflects focused and
targeted efforts to capitalize on opportunities, including expanding our product
offerings in areas such as finite and financial products, to meet the risk
management needs of our customers. In addition, our balance sheet remains
strong, and we are committed to a philosophy of strict underwriting discipline,
which is enabling us to achieve our profitability objectives."
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<PAGE>
PMA Re
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PMA Capital's reinsurance operations, PMA Re, reported pre-tax operating income
of $12.7 million for the first quarter of 1999, compared with $11.4 million for
the same period last year. The increase in operating results reflects improved
underwriting results due primarily to a lower expense ratio.
Net premiums written for PMA Re increased 11% to $78.3 million in the first
quarter of 1999, compared with $70.8 million for the same period last year. This
increase is primarily due to expanding relationships with PMA Re's existing
clients, as well as contracts with new clients, which primarily reflect the
successful expansion of finite and financial product offerings.
PMA Re's combined ratio, as computed using generally accepted accounting
principles ("GAAP"), was 101.7% for the first quarter of 1999, compared with
104.6% for the same period last year. The improvement in the combined ratio
primarily reflects a lower expense ratio.
The PMA Insurance Group
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The PMA Insurance Group reported pre-tax operating income of $5.0 million for
the first quarter of 1999, compared with $2.7 million for the same period last
year. The improvement in pre-tax operating results for 1999 was primarily
attributable to improved loss experience, reduced exposures and lower operating
expenses resulting from ongoing cost reduction initiatives.
The PMA Insurance Group's net premiums written increased 1% to $83.0 million for
the first quarter of 1999, compared with $82.5 million for the same period last
year. The improvement in net premiums written reflects a $3.3 million increase
in direct premiums written, substantially offset by a $3.1 million increase in
ceded premiums. Direct written premiums for workers' compensation increased 6%
to $71.3 million in the first quarter of 1999, compared with $67.2 million for
the same period last year, reflecting focused marketing efforts on workers'
compensation business.
The PMA Insurance Group's GAAP combined ratio, excluding Run-off Operations (see
discussion below), was 114.3% for the first quarter of 1999, compared with
116.8% for the same period last year. The improvement primarily reflects a lower
expense ratio and continued underwriting discipline.
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 first quarter of 1999, Run-off Operations had pre-tax operating income of
$66,000, compared with $135,000 for the same period last year.
Investment income declined significantly in the first quarter of 1999, compared
with the first quarter of 1998, primarily due to lower invested assets as a
result of the sale of PMA Insurance, Cayman Ltd. in the third quarter of 1998.
The sale of this entity also resulted in a reduction of losses and loss
adjustment expenses commensurate with the decline in net investment income.
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Caliber One
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For the first quarter of 1999, Caliber One, which commenced writing business in
January 1998, recorded a pre-tax operating loss of $696,000, compared with a
loss of $389,000 for the same period last year. These losses primarily related
to the start-up nature of this operation.
Caliber One's net premiums written for the first quarter of 1999 were $7.3
million, compared with $212,000 for the same period last year.
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 PMA Capital's real estate properties. For the first quarter of 1999, pre-tax
operating losses for this segment were $4.8 million, compared with $6.5 million
for the first quarter of 1998. The reduction in losses for the first quarter of
1999 primarily reflects lower interest expense and higher net revenues from
non-core real estate properties.
Financial Position
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Total assets were $3.5 billion as of March 31, 1999 and December 31, 1998.
Shareholders' equity was $483.3 million, or $20.90 per share, as of March 31,
1999, compared with $511.5 million, or $21.90 per share, as of December 31,
1998. This decrease reflects a $25 million reduction in after-tax unrealized
appreciation on fixed maturities due to an increase in interest rates. Excluding
unrealized appreciation on fixed maturities, book value per share increased to
$20.68 as of March 31, 1999, from $20.61 as of December 31, 1998.
Share Repurchase Plan
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During the first quarter of 1999, PMA Capital repurchased 577,000 shares of its
Class A Common Stock at a cost of $11.3 million (average per share price was
$19.53). Since the inception of its share repurchase program in early 1998, PMA
Capital has repurchased a total of 1.6 million shares at a total cost of $30.1
million (average per share price was $19.13), with remaining share repurchase
authorization of $14.9 million.
Quarterly Dividends
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On May 5, 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 June 10, 1999. The dividends
will be paid on July 1, 1999. PMA Capital has paid a quarterly dividend to
shareholders for the past 82 years.
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<PAGE>
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.
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
March 31,
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Income Statement Data: 1999 1998
Net premiums written:
<S> <C> <C>
PMA Re $ 78,327 $ 70,819
The PMA Insurance Group 83,021 82,542
Caliber One 7,322 212
Corporate and other (153) --
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Consolidated $ 168,517 $ 153,573
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Net premiums earned:
PMA Re $ 52,433 $ 46,098
The PMA Insurance Group 54,399 60,798
Caliber One 2,643 26
Corporate and other (153) --
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Consolidated $ 109,322 $ 106,922
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Components of operating income (loss) (1):
PMA Re $ 12,749 $ 11,372
The PMA Insurance Group 4,985 2,736
Caliber One (696) (389)
Corporate and other (1,755) (2,791)
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Pre-tax operating income before interest expense 15,283 10,928
Interest expense 3,013 3,701
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Pre-tax operating income $ 12,270 $ 7,227
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After-tax operating income $ 7,898 $ 7,204
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Weighted Average Common Shares Outstanding:
Basic 23,317,630 23,850,631
Diluted 24,103,452 24,582,335
After-tax Operating Income Per Share:
Basic $ 0.34 $ 0.30
==============================
Diluted $ 0.33 $ 0.29
==============================
Balance Sheet Data: March 31, 1999 Dec. 31, 1998
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Total assets $ 3,508,714 $ 3,460,718
Shareholders' equity $ 483,348 $ 511,480
Shareholders' equity per share $ 20.90 $ 21.90
</TABLE>
(1) Pre-tax operating income (loss) represents pre-tax income (loss) before the
cumulative effect of accounting change and excluding pre-tax net realized
investment gains. After-tax operating income (loss) is net income (loss) before
the cumulative effect of accounting change and excluding after-tax net realized
investment gains.
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