PMA CAPITAL CORP, DEF 14A, 2000-03-22

PMA CAPITAL CORP
DEF 14A, 2000-03-22
FIRE, MARINE & CASUALTY INSURANCE

Previous: EIGER TECHNOLOGY INC, 6-K, 2000-03-22

Next: SCE FUNDING LLC, 10-K, 2000-03-22

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12

PMA Capital Corporation
(Name of Registrant as Specified In Its Charter)

N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

N/A

(2) Aggregate number of securities to which transaction applies:

N/A

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

N/A

(4) Proposed maximum aggregate value of transaction:

N/A

(5) Total fee paid:

N/A

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:

<PAGE>

[LOGO OF PMA CAPITAL APPEARS HERE]

1735 Market Street, Suite 2800
Philadelphia, PA 19103-7590
------------------------------------

Notice of 2000 Annual Meeting of Shareholders
To Be Held April 24, 2000
---------------------------------------

Dear PMA Capital Shareholder:

On Monday, April 24, 2000, PMA Capital Corporation will hold its Annual
Meeting of Shareholders at 380 Sentry Parkway, Blue Bell, Pennsylvania
19422-2328. The Annual Meeting will begin at 9 a.m.

We are holding the Annual Meeting:

1. To elect four directors to serve until 2003 and until their successors
are elected;

2. To vote upon a proposal to approve a reclassification amendment to the
Company's Amended and Restated Articles of Incorporation;

3. To vote upon a proposal to approve an amendment to the Company's
Amended and Restated Articles of Incorporation to authorize 2,000,000
shares of undesignated Preferred Stock, $.01 par value per share;

4. To vote upon a proposal to approve an amendment to the Company's
Amended and Restated Articles of Incorporation to eliminate cumulative
voting;

5. To vote upon a proposal to approve the PMA Capital Corporation Annual
Incentive Plan;

6. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants; and

7. To transact any other business properly presented at the meeting and
any adjournments.

The Board recommends that you vote FOR items 1 through 6.

Only shareholders of record at the close of business on March 6, 2000 are
entitled to vote at the Meeting and any adjournments. A copy of our 1999 Annual
Report to shareholders accompanies this notice.

By Order of the Board of Directors,

Frederick W. Anton III
March 23, 2000 Chairman of the Board
- --------------------------------------------------------------------------------

You are cordially invited to attend the meeting. Whether or not you plan to
attend in person, please mark, date, sign and mail the enclosed proxy. A return
envelope requiring no postage is enclosed for your convenience.

- --------------------------------------------------------------------------------

<PAGE>
PMA CAPITAL CORPORATION
1735 Market Street, Suite 2800
Philadelphia, PA 19103-7590

-----------------------

Proxy Statement
------------------------

GENERAL INFORMATION

You are being sent this Proxy Statement and the enclosed proxy in
connection with the solicitation by the Company's Board of Directors of proxies
to be voted at the Annual Meeting and at any adjournments. The approximate date
of mailing of this Proxy Statement and the enclosed proxy is March 23, 2000.

You are being asked to vote on these items:

(1) The election of four directors;

(2) The approval of a reclassification amendment to the Company's Amended
and Restated Articles of Incorporation;

(3) The approval of an amendment to the Company's Amended and Restated
Articles of Incorporation to authorize a class of undesignated
Preferred Stock;

(4) The approval of an amendment to the Company's Amended and Restated
Articles of Incorporation to eliminate cumulative voting;

(5) The approval of the PMA Capital Corporation Annual Incentive Plan; and

(6) The ratification of PricewaterhouseCoopers LLP as independent
accountants.

You may vote your shares either in person or by proxy. To vote by proxy,
you should mark, date, sign and mail the enclosed proxy in the prepaid envelope.
Giving a proxy will not affect your right to vote your shares if you attend the
Annual Meeting and want to vote in person; by voting in person you automatically
revoke your proxy. You also may revoke your proxy at any time before it is voted
by giving the Company's Secretary written notice of your revocation or by
submitting a later-dated proxy. If you return your proxy but do not mark your
voting preference, the individuals named as proxies will vote your shares FOR
each item described in this Proxy Statement.

The Company will pay the cost of soliciting proxies. This solicitation will
be made by mail and may also be made on behalf of the Company by the Company's
officers, directors and employees in person or by telephone or telegram. The
Company will reimburse banks, brokers, nominees, custodians and fiduciaries for
their reasonable out-of-pocket expenses for sending proxies and proxy materials
to beneficial owners.

Only holders of Common Stock and Class A Common Stock of record as of the
close of business on March 6, 2000 will be entitled to vote at the Annual
Meeting. As of the close of business on March 6, 2000, the Company had
outstanding 12,419,178 shares of Common Stock and 9,857,089 shares of Class A
Common Stock. Each holder of Common Stock is entitled to cast ten votes for each
share of Common Stock held, and each holder of Class A Common Stock is entitled
to cast one vote for each share of Class A Common Stock held. Therefore, a total
of 134,048,869 votes will be entitled to be cast at the Annual Meeting.

<PAGE>

The holders of Common Stock and Class A Common Stock representing a
majority of the votes entitled to be cast at the Annual Meeting will constitute
a quorum. If you submit a properly executed proxy card, even if you abstain from
voting or withhold your vote, you will be considered present at the Annual
Meeting, and therefore, part of the quorum. Broker non-votes will also be
counted as part of the quorum.

BENEFICIAL OWNERSHIP OF COMMON STOCK AND CLASS A COMMON STOCK

Principal Beneficial Owners of Common Stock and Class A Common Stock

The following table shows, as of December 31, 1999, those shareholders
(other than officers and directors of the Company) known to the Company to
beneficially own more than 5% of the outstanding Common Stock or Class A Common
Stock, and the percentage of the total number of votes that these persons are
entitled to cast on matters submitted to the shareholders of the Company. The
shareholdings of officers and directors, including those who beneficially own
more than 5% of the Common Stock or Class A Common Stock, are shown in the table
on page 3.

<TABLE>
<CAPTION>
Percent Class A Percent Percent of
Common of Common of Total
Name & Address Stock Class Stock (1) Class Votes (2)
- ------------------------------------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
PMA Foundation 4,561,225 36.1% 5,473,450 38.4% 34.2%
1735 Market Street, Suite 2800
Philadelphia, PA 19103-7590

Royce & Associates, Inc. (3) -- -- 703,221 7.3% 0.5%
1414 Avenue of the Americas
New York, NY 10019
- ----------
<FN>
(1) This column reflects the shares of Class A Common Stock issuable upon
conversion of the shares of Common Stock, each of which is convertible
into one share of Class A Common Stock.
(2) This column sets forth the percentage of votes entitled to be cast by
such persons on matters submitted to shareholders for a vote on the basis
of ten votes per share of Common Stock and one vote per share of Class A
Common Stock. The calculation does not reflect any conversions of current
holdings of Common Stock into Class A Common Stock.
(3) This information is from a Schedule 13F filed by Royce & Associates, Inc.
</FN>
</TABLE>

2
<PAGE>
Beneficial Ownership by Directors and Executive Officers

The following shows, as of February 21, 2000, (i) the shares and percentage
of the Company's Common Stock and Class A Common Stock beneficially owned by (a)
each director and each nominee for director, (b) each executive officer named in
the Summary Compensation Table and (c) all executive officers and directors of
the Company as a group, and (ii) the respective percentage of the total number
of votes that the persons and group will be entitled to cast on matters
submitted to the shareholders of the Company.

<TABLE>
<CAPTION>
Common Stock Class A Common
Name of Individual or Identity of Beneficially Percent Stock Beneficially Percent Percent of
Group (1) Owned of Class Owned (5) of Class Total Votes (6)
- ------------------------------------ ----------------- ----------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Frederick W. Anton III (2)(3) 130,603 1.1% 498,082(4)(7) 5.0% 1.0%
Paul I. Detwiler, Jr. (2) 73,650(8) * 86,584(8) * *
Joseph H. Foster (2) - * 17,025 * *
Anne S. Genter (2) 500 * 2,700(9) * *
James F. Malone, III (2)(3) 845,800 6.8% 1,244,000 11.6% 6.6%
A. John May (2)(3) 257,200(10) 2.1% 312,810(10) 3.1% 2.0%
Louis N. McCarter, III (2) - * 10,000(11) * *
John W. Miller, Jr., M.D. (2) 109,950 * 591,500 5.9% 1.2%
Edward H. Owlett (2)(3) 635,910(12) 5.1% 860,600(12) 8.2% 4.9%
Louis I. Pollock (2) 308,125(13) 2.5% 367,350(13) 3.6% 2.3%
Roderic H. Ross (2) 3,500 * 6,050 * *
L.J. Rowell, Jr. (2) 1 * 1,001 * *
John W. Smithson (2)(3) 193,900(14) 1.6% 665,161(14) 6.6% 1.5%
Stephen G. Tirney 106,375 * 299,486(15) 3.0% *
Vincent T. Donnelly 1,125 * 136,092(16) 1.4% *
Ronald S. Austin - * 45,545(17) * *
All executive officers and
directors as a group (18 persons) 2,669,139(18) 21.5% 5,270,719(18) 42.1% 21.1%
- ----------
* Less than 1%.
<FN>
(1) The mailing address of the directors and executive officers owning
more than 5% of a class of the Company's equity securities is: c/o the
Company's Secretary, PMA Capital Corporation, 1735 Market Street, Suite
2800, Philadelphia, PA 19103-7590.
(2) As of February 21, 2000, PMA Foundation beneficially owned 4,561,225
shares of Common Stock and 5,473,450 shares of Class A Common Stock,
which entitles the Foundation to cast approximately 34.7% of the total
number of votes that will be entitled to be cast on matters submitted to
the shareholders of the Company. Other information regarding the
Foundation's shareholdings are set forth in the table on page 2. The
Board of Trustees of the Foundation has sole voting power and investment
power with respect to the shares of Common Stock and Class A Common Stock
of the Company held by the Foundation. These individuals are members of
the Board of Trustees of the Foundation and disclaim beneficial ownership
of the Foundation's shares, which are excluded from the above table.
(3) As of February 21, 2000, Pennsylvania Manufacturers' Association,
Northeast Branch beneficially owned 70,500 shares of Common Stock and
84,600 shares of Class A Common Stock, representing less than 1% of each
class of stock and the votes entitled to be cast. The Board of Trustees
of Northeast Branch has sole voting power and investment power with
respect to the shares held by the Northeast Branch. These individuals are
members of the Board of Trustees of Northeast Branch and disclaim
beneficial ownership of Northeast Branch's shares, which are excluded
from the above table.
(4) Includes 10,000 shares of Class A Common Stock held by a private
charitable foundation of which Mr. Anton is the sole trustee.
(5) This column reflects the shares of Class A Common Stock issuable upon
conversion of the shares of Common Stock, each of which is currently
convertible into one share of Class A Common Stock.

3
<PAGE>

(6) This column sets forth the percentage of votes entitled to be cast by
such persons on matters submitted to shareholders for a vote on the basis
of ten votes per share of Common Stock and one vote per share of Class A
Common Stock. The calculation does not reflect any conversions of shares
of Common Stock into Class A Common Stock. The calculation of these
percentages also does not include shares of Class A Common Stock issuable
upon currently exercisable stock options held by such persons under the
Company's equity incentive plans.
(7) Includes options to purchase 275,011 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(8) Includes 1,000 shares of Class A Common Stock owned jointly by Mr.
Detwiler and his wife and 9,375 shares of Common Stock and 2,500 shares
of Class A Common Stock owned by one of Mr. Detwiler's children who
resides in his household.
(9) Includes 1,500 shares of Class A Common Stock held by Ms. Genter's
husband.
(10) Includes 11,250 shares of Common Stock and 2,650 shares of Class A Common
Stock owned jointly by Mr. May and his wife; and 17,250 shares of Class A
Common Stock held by a partnership of which Mr. May is a general partner.
(11) These shares are owned jointly by Mr. McCarter and his wife.
(12) Includes: (i) 405,850 shares of Common Stock and 9,500 shares of
Class A Common Stock held in certain Owlett family trusts, of which Mr.
Owlett shares voting and dispositive power with Citizens & Northern Bank
with respect to 47,500 of such shares of Common Stock and 9,500 of such
shares of Class A Common Stock; and (ii) 20,660 shares of Common Stock
and 7,840 shares of Class A Common Stock held by Mr. Owlett's wife. Mr.
Owlett disclaims beneficial ownership of the shares held by his wife and
316,700 shares of Common Stock held by one of his family trusts. Also
includes 93,100 shares of Class A Common Stock held in certain trusts for
which Mr. Owlett serves as trustee. Mr. Owlett disclaims beneficial
ownership of the shares held in these trusts.
(13) Includes 100 shares of Class A Common Stock owned jointly by Mr. Pollock
and his wife; 143,750 shares of Common Stock and 27,500 shares of Class A
Common Stock held in a trust for which Mr. Pollock serves as trustee; and
164,375 shares of Common Stock and 31,625 shares of Class A Common Stock
held in a trust for which Mr. Pollock's wife serves as trustee.
(14) Includes 55,000 shares of Common Stock held by Mr. Smithson's wife; an
aggregate of 2,200 shares of Common Stock and 2,080 shares of Class A
Common Stock held by Mr. Smithson's children who reside in his household;
and options to purchase 368,236 shares of Class A Common Stock that are
currently exercisable or will become exercisable within the next 60 days
under the Company's equity incentive plans.
(15) Includes 500 shares of Class A Common Stock held by Mr. Tirney's wife and
an aggregate of 5,000 shares held by Mr. Tirney's children who reside in
his household, and options to purchase 145,236 shares of Class A Common
Stock that are currently exercisable or will become exercisable within
the next 60 days under the Company's equity incentive plans.
(16) Includes options to purchase 117,736 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(17) Includes options to purchase 23,743 shares of Class A Common Stock that
are currently exercisable or will become exercisable within the next 60
days under the Company's equity incentive plans.
(18) Includes options to purchase 1,008,513 shares of Class A Common Stock
that are currently exercisable or will become exercisable within the next
60 days under the Company's equity incentive plans.
</FN>
</TABLE>

ITEM 1. ELECTION OF DIRECTORS

The Company's Board of Directors consists of 13 members. Each director is
elected for a three-year term and until the director's successor has been duly
elected. The current three-year terms of the Company's directors expire in the
years 2000, 2001 and 2002.

Four directors whose terms expire at the Annual Meeting are to be elected
for terms expiring at the 2003 Annual Meeting. All of the nominees are currently
directors of the Company. If any nominee becomes unavailable for any reason, it
is intended that the proxies will be voted for a substitute nominee selected by
the Board of Directors. The Board of Directors has no reason to believe that any
of the nominees named will be unable to serve if elected. Any vacancy occurring
on the Board of Directors for any reason may be filled by the Board of Directors
for the unexpired term.

4
<PAGE>
Vote Requirement

Cumulative voting rights exist with respect to the election of directors,
which means that you have the right, in person or by proxy, to multiply the
number of votes to which you are entitled by the number of directors of the
class to be elected, and to cast the whole number of such votes for one
candidate or to distribute them among two or more candidates. The four nominees
who receive the highest number of votes cast by the holders of Common Stock and
Class A Common Stock entitled to vote, voting together without regard to class,
will be elected as directors of the Company. Votes withheld and broker non-votes
are not counted toward a nominee's total.

The Board of Directors recommends that the shareholders vote FOR each
of the nominees identified below.

The names of the nominees for director and the directors who will continue
in office after the Annual Meeting, together with certain information regarding
them, are as follows:

Nominees for Election
---------------------

Nominees for Election with Terms Expiring at the 2003 Annual Meeting

Frederick W. Anton III, age 66 Director since 1972

Mr. Anton has served as Chairman of the Board of the Company since 1995. He
has served as Chairman of the Board and Chief Executive Officer from 1995 to May
1997 and as President and Chief Executive Officer from 1981 to 1995. He started
with the Company in 1962.

Joseph H. Foster, age 71 Director since 1982

Mr. Foster has been a partner of White & Williams, a law firm, since 1958.

James F. Malone III, age 56 Director since 1974

Mr. Malone has been a partner of Malone, Larchuk & Middleman, P.C., a law
firm, since 1997 and from 1980 to 1997 was a partner of Dickie, McCamey &
Chilcote, P.C., a law firm.

L. J. Rowell, Jr., age 67 Director since 1992

Mr. Rowell was Chairman, President and Chief Executive Officer of
Provident Mutual Life Insurance Company from 1992 until his retirement in July
1996.

Directors Continuing In Office
------------------------------

Directors Continuing in Office with Terms Expiring at the 2001 Annual Meeting

Louis N. McCarter III, age 71 Director since 1975

Mr. McCarter has been President and Chief Executive Officer of The
McCarter Corp., a manufacturer of specialized mixing machinery, since 1954.

John W. Miller, Jr., M.D., age 65 Director since 1988

Dr. Miller is a physician and served as President of Ear, Nose and Throat
Associates of Lancaster from 1970 until his retirement in October 1998.

5
<PAGE>

Edward H. Owlett, age 73 Director since 1964

Mr. Owlett has been President of Owlett, Lewis & Ginn, P.C., a law firm,
since 1981.

Louis I. Pollock, age 70 Director since 1984

Mr. Pollock has served as Chief Executive Officer & Chairman of Morris
Coupling Company, a manufacturer of pipe and tube couplings and provider of pipe
bending and fabrication, since 1957.

Directors Continuing in Office with Terms Expiring at the 2002 Annual Meeting

Paul I. Detwiler, Jr., age 66 Director since 1984

Mr. Detwiler is Chairman of the Board of New Enterprise Stone & Lime Co.,
a quarrying and construction company, since 1990. He is also a director of
Keystone Financial, Inc.

Anne S. Genter, age 65 Director since 1991

Ms. Genter is owner and President of Anne S. Genter Interior Design, an
interior design company, since 1975.

A. John May, age 71 Director since 1977

Mr. May has been an attorney with Duane, Morris & Heckscher LLP, a law
firm, for more than 40 years. He was Chairman of the Board of the Company
from 1982 to 1995.

Roderic H. Ross, age 69 Director since 1981

Mr. Ross has served as Chairman of the Board and Chief Executive Officer
of Keystone State Life Insurance Company, since 1985. He is also a director
of Hunt Corporation and PNC Bank Corp.

John W. Smithson, age 54 Director since 1987

Mr. Smithson has served as President and Chief Executive Officer of the
Company, since May 1997. He served as President and Chief Operating Officer of
the Company from 1995 to May 1997, as Chairman and Chief Executive Officer of
PMA Reinsurance Corporation, since 1984, as Chairman and Chief Executive Officer
of The PMA Insurance Group, since April 1995 and as Chairman and Chief Executive
Officer of Caliber One Management Company, since April 1997. He started with the
Company in 1972.

THE BOARD OF DIRECTORS AND ITS COMMITTEES

The Board of Directors met four times in 1999. The Board of Directors has
Executive and Finance Committees, an Audit Committee, a Nominating Committee, a
Compensation Committee and a Stock Option Committee. During 1999, no director
attended fewer than 75% of the total number of meetings of the Board of
Directors and all committees on which the director served.

The Executive and Finance Committees met seven times in 1999. Messrs.
Anton, Malone, May, McCarter, Miller, Owlett and Smithson are the members of the
Executive and Finance Committees. The Executive and Finance Committees have the
authority to take all action that may be taken by the full Board of Directors,
consistent with Pennsylvania law, between Board of Directors' meetings.

6
<PAGE>

The Audit Committee of the Company consists of Messrs. Owlett, Pollock and
Rowell. The Audit Committee, which met four times in 1999, reviews with
management and the Company's independent accountants the Company's financial
statements and earnings releases. The Audit Committee also reviews audit
reports, audit plans, auditor fees and management recommendations made by the
Company's outside auditors.

The Nominating Committee of the Company consists of Messrs. May, McCarter,
Miller and Owlett. The Nominating Committee, which met one time in 1999, is
responsible for nomination of candidates to stand for election to the Board of
Directors at the Annual Meeting and the nomination of candidates to fill
vacancies on the Board of Directors between meetings of shareholders. The
Nominating Committee will consider nominations for directors from shareholders
to the extent the nominations are made in accordance with the Company's Bylaws.
Under the Company's Bylaws, every director is required to be a shareholder of
the Company, and no person may be considered as a candidate, and no votes may be
counted for any person, unless written notice of such person's nomination or
candidacy has been filed with the Secretary of the Company not less than 60 days
prior to the date of the election. However, current directors whose terms will
expire at the upcoming election and nominees selected by the Board of Directors
or the Nominating Committee may be candidates and voted for without such notice.

The Compensation Committee of the Company consists of Messrs. Miller,
Owlett and Rowell. The Compensation Committee met three times in 1999. The
Committee reviews and recommends compensation plans and approves certain
compensation changes. The Committee reviews and approves the cash compensation
of the Company's executive officers, including the Chief Executive Officer.

The Stock Option Committee of the Company consists of Messrs. Miller and
Rowell. The Stock Option Committee met three times in 1999 to grant options
under, and determine participants in, the Company's equity incentive plans.

DIRECTOR COMPENSATION

In addition to expenses of attendance, which are paid to all directors,
directors of the Company who are not also employees of the Company are paid an
annual retainer of $15,000 for their services and a fee of $1,000 for each Board
of Directors meeting and $1,000 for each committee meeting that they attend;
provided, that if a director attends more than one committee meeting in any one
day, the total fee for attendance at all committee meetings will not exceed
$1,000.

7
<PAGE>

COMPENSATION OF EXECUTIVE OFFICERS

The following information is furnished for the Chief Executive Officer of
the Company and the four most highly compensated executive officers of the
Company and its principal subsidiaries other than the Chief Executive Officer at
the end of 1999.

<TABLE>
<CAPTION>
Summary Compensation Table

Long-Term
Compensation
--------------

Annual Compensation Awards
--------------------------------------------- --------------

Other Annual Securities All Other
Name and Principal Compensation Underlying Compensation
Position Year Salary ($) Bonus ($) ($)(1) Options (#) ($)
- -------------------------- ------- ----------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John W. Smithson 1999 700,000 550,000 13,067 55,000 59,916(2)
President and Chief 1998 700,000 550,000 4,991 140,000 106,365
Executive Officer 1997 692,115 382,000 8,848 40,000 85,192

Frederick W. Anton III 1999 700,000 -- 102,380 -- 342,657(3)
Chairman of the Board 1998 700,000 -- 6,543 -- 162,550
1997 700,000 -- 18,084 -- 177,073

Stephen G. Tirney 1999 390,000 310,000 3,325 20,000 25,701(4)
President and Chief 1998 388,077 310,000 3,706 100,000 67,569
Operating Officer of 1997 362,428 150,000 3,413 19,500 63,604
PMA Reinsurance
Corporation

Vincent T. Donnelly 1999 350,000 200,000 -- 20,000 61,449(5)
President and Chief 1998 350,000 200,000 -- 100,000 90,589
Operating Officer of 1997 329,511 125,000 1,719 19,500 58,748
The PMA Insurance
Group

Ronald S. Austin 1999 339,625 180,000 2,601 20,000 39,639(6)
President and Chief 1998 336,812 180,000 77,595 100,000 40,076
Operating Officer of 1997 219,358 200,000 6,228 19,500 12,421
Caliber One Management
Company
- ----------
<FN>
(1) Amounts represent tax payment reimbursements for certain benefits. In
addition, Mr. Anton's 1999 amount includes perquisites of which $53,961
related to financial planning, tax preparation and related services, and
Mr. Austin's 1998 amount includes the payment of $48,356 in certain
relocation expenses.
(2) Amounts represent Company contributions to its non-qualified 401(k)
excess plan of $27,000, Company matching contributions to its 401(k) plan
of $8,000 and $24,916 of life insurance premiums paid by the Company.
(3) Amounts represent Company contributions to its non-qualified 401(k)
excess plan of $27,000, Company matching contributions to its 401(k) plan
of $8,000, $218,181 of life insurance premiums paid by the Company and
$89,476 in earnings on investments under the Company's Deferred
Compensation Plan other than those offered under the Company's 401(k)
plan.
(4) Amounts represent Company contributions to its non-qualified 401(k)
excess plan of $11,500, Company matching contributions to its 401(k) plan
of $8,000, $5,795 of life insurance premiums paid by the Company and $406
in earnings on investments under the Company's Deferred Compensation Plan
other than those offered under the Company's 401(k) plan.

8
<PAGE>

(5) Amounts represent Company contributions to its non-qualified 401(k)
excess plan of $9,500, Company matching contributions to its 401(k) plan
of $8,000, $6,244 of life insurance premiums paid by the Company and
$37,705 in earnings on investments under the Company's Deferred
Compensation Plan other than those offered under the Company's 401(k)
plan.
(6) Amounts represent Company contributions to its non-qualified 401(k)
excess plan of $8,981, Company matching contributions to its 401(k) plan
of $8,000, $11,178 of life insurance premiums paid by the Company and
$11,480 in earnings on investments under the Company's Deferred
Compensation Plan other than those offered under the Company's 401(k)
plan.
</FN>
</TABLE>

Option Grants in Last Fiscal Year

The following table sets forth certain information with respect to options
to purchase shares of Class A Common Stock granted to the persons named in the
Summary Compensation Table during the fiscal year ended December 31, 1999.

<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------

Number of
Securities % of Total
Underlying Options
Options Granted to Exercise Grant Date
Granted Employees in Price Expiration Present Value
Name (#) Fiscal Year ($/Share) Date ($) (3)
- ----------------------------- ------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
John W. Smithson 55,000 (1) 12.9% $19.50 2/3/09 $520,575
Frederick W. Anton III -- -- -- -- --
Stephen G. Tirney 20,000 (2) 4.7% $19.50 2/3/09 $189,300
Vincent T. Donnelly 20,000 (2) 4.7% $19.50 2/3/09 $189,300
Ronald S. Austin 20,000 (2) 4.7% $19.50 2/3/09 $189,300
- --------------------------------------------------------------------------------
<FN>
(1) These options become exercisable for 18,150 shares on 2/3/01, 18,150
shares on 2/3/02 and 18,700 shares on 2/3/03.
(2) These options become exercisable for 6,600 shares on 2/3/01, 6,600 shares
on 2/3/02 and 6,800 shares on 2/3/03.
(3) Based on a binomial option pricing model adapted for use in valuing
executive stock options. Calculations of grant date present values for
all options assume an option life of 10 years, a dividend yield of 2.0%,
a price volatility of Class A Common Stock of 17% and a risk-free
interest rate of 4.8%. The approach used in developing the foregoing
assumptions is consistent with the requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
The actual value, if any, an executive may realize will depend on the
excess of the stock price on the date the option is exercised over the
exercise price, so there is no assurance the value realized by an
executive will be at or near the value estimated by the binomial option
pricing model. The Company believes that no model accurately predicts the
future price of the Class A Common Stock or places an accurate present
value on stock options.
</FN>
</TABLE>

9
<PAGE>
Aggregated Option Exercises in the Last Fiscal Year and
Fiscal Year-End Option Values

The following table sets forth information with respect to options to
purchase shares of Class A Common Stock exercised by the persons named in the
Summary Compensation Table during the fiscal year ended December 31, 1999 and
options held by those persons at December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options In-the-Money Options at
Acquired at Fiscal Year-End Fiscal Year-End (2)
on Value ------------------------------ -------------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (1) (#) (#) ($) ($)
- ------------------------- ---------- ---------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John W. Smithson -- -- 362,436 172,564 2,083,004 358,622
Frederick W. Anton III -- -- 280,366 5,800 1,649,214 16,675
Stephen G. Tirney 14,000 127,750 130,779 126,221 806,490 312,885
Vincent T. Donnelly 5,000 43,125 103,279 126,221 540,377 312,885
Ronald S. Austin -- -- 22,743 116,757 65,386 285,676
- ----------
<FN>
(1) Represents the difference between the aggregate exercise price and the
aggregate market value as of the date of exercise.
(2) Represents the difference between the aggregate exercise price and the
aggregate market value as of December 31, 1999.
</FN>
</TABLE>

Pension Plans

Under the PMA Capital Corporation Pension Plan ("PMA Pension Plan"), the
PMA Capital Corporation Supplemental Executive Retirement Plan ("PMA SERP") and
the PMA Capital Corporation Executive Management Pension Plan ("PMA EMPP"),
participants are entitled to benefits pursuant to the formula set forth under
such plans. The benefits payable under the PMA Pension Plan are limited by
Sections 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended
(the "Code"). The benefit payable under the PMA SERP is the difference between
the amount that would be payable under the PMA Pension Plan without regard to
the Code limits and the amount actually payable under the PMA Pension Plan. The
PMA EMPP provides additional years of service credit to certain executives hired
in mid-career. The benefit payable under the PMA EMPP for the additional years
of service is based on the formula in the PMA Pension Plan but without regard to
the limitations under Section 415 and 401(a)(17) of the Code. The benefit under
the PMA Pension Plan is based upon the accrued pension benefit for the
participant on December 31, 1992, plus annual accruals beginning January 1, 1993
equal to the sum of (i) 1.5% of the participant's compensation for each year of
benefit service after December 31, 1992, up to a maximum of 25 years, plus (ii)
0.3% of the participant's compensation in excess of covered compensation for
each year of benefit service after December 31, 1992, up to a maximum of 25
years. For purposes of the above formula, compensation consists of a
participant's base rate of pay, short-term disability pay and employer
contributions made pursuant to a salary reduction agreement which are not
includible in the participant's gross income under Code Sections 125 and
402(e)(3). Covered compensation consists of the average (without indexing) of
the participant's taxable wage bases in effect for each calendar year during the
35-year period ending on the last day of the calendar year in which the
participant attains Social Security retirement age. In no event, however, will a
participant's benefit under the PMA Pension Plan be less than such participant's
accrued benefit under the PMA Pension Plan on December 31, 1992. The PMA Pension
Plan is a qualified plan and benefits are payable from its trust. Both the PMA
SERP and the PMA EMPP are non-qualified, unfunded, deferred compensation plans
and, as such, the benefits under each constitute unsecured contractual
obligations of the Company.

The executive officers named in the Summary Compensation Table had the
following years of service as of December 31, 1999: (i) Mr. Smithson, 28 years;
(ii) Mr. Anton, 37 years; (iii) Mr. Tirney, 24 years; (iv) Mr. Donnelly, 8
years; and (v) Mr. Austin, 3 years. Based upon the above formula and years of
service, the estimated annual benefit payable under the PMA Pension Plan, the
PMA SERP and the PMA EMPP upon normal retirement at age 65 for each executive
officer named in the Summary Compensation Table would be as follows: (i) Mr.
Smithson, $288,200; (ii) Mr. Anton, $270,400; (iii) Mr. Tirney,

10
<PAGE>

$114,200; (iv) Mr. Donnelly, $62,000; and (v) Mr. Austin, $30,600. The amounts
for Mr. Anton do not include other retirement payments that would be provided
pursuant to his employment agreement described below.

Employment Agreements

Frederick W. Anton III and John W. Smithson have employment agreements with
the Company. Mr. Anton's employment agreement with the Company was amended and
restated in 1999. The primary purpose of the amendment and restatement was to
eliminate the contractual death benefit in the employment agreement and replace
it with new split-dollar life insurance arrangements. The former contractual
death benefit would have paid Mr. Anton's survivors an annual payment of 60% of
his salary on the date of his death for a period of ten years. The split-dollar
insurance arrangements provide an actuarial equivalent benefit without
additional expense to the Company. Under the amended and restated agreement, the
Company is required to maintain split-dollar life insurance policies providing
death benefits of approximately $5.4 million on the life of Mr. Anton. The term
of the employment agreement commenced on May 1, 1999 and currently ends April
30, 2004, and is subject to automatic extension for an additional period of one
year for each year Mr. Anton is elected as Chairman of the Board of the Company
at each organizational meeting of the Board of Directors of the Company. The
employment agreement provides for a salary of not less than $700,000 per year,
which may be increased, but not decreased by the Company, at any time or from
time to time. Mr. Anton has agreed during the term of the employment agreement
not to engage or have a material financial interest in any business that
competes with the business of the Company as then conducted. In the event of Mr.
Anton's death during the term of the agreement, the Company is released from all
obligations to pay Mr. Anton, his heirs or personal representatives any salary
other than any portions of his annual salary, which has been accrued and unpaid
on his date of death. If Mr. Anton retires at any time, Mr. Anton would be
entitled to receive monthly payments equal to 5% of his annual salary on the
date of his retirement and continuing throughout his lifetime. The Company is
obligated to establish an irrevocable trust prior to Mr. Anton's retirement and
make contributions to the trust sufficient to pay his retirement benefits as
they become due.

Mr. Smithson's employment agreement with the Company is for a term that
commenced April 1, 1995 and currently expires March 31, 2002, and is subject to
automatic extension for an additional period of one year for each year Mr.
Smithson is re-elected President of the Company at each annual organizational
meeting of the Board of Directors of the Company. The employment agreement
provides for a salary of not less than $670,000 per year, which may be
increased, but not decreased, at the discretion of the Company at any time or
from time to time. Mr. Smithson may also receive bonus compensation as he may be
awarded from time to time. Mr. Smithson has agreed during the term of the
employment agreement not to engage in or have a material financial interest in
any business that competes with the Company as then conducted. In the event of
Mr. Smithson's death during the term of the agreement, Mr. Smithson's survivors
are entitled to 180 consecutive monthly payments of an amount equal to 25% of
Mr. Smithson's monthly salary as of the date of his death, reduced by the amount
of any similar payments for disability paid to Mr. Smithson during his lifetime
in the event Mr. Smithson becomes disabled during the employment term. Under the
agreement, the Company is required to maintain a split-dollar life insurance
policy in the face amount of $1,000,000 on the life of Mr. Smithson.

Compensation Committee Interlocks and Insider Participation

The following directors constitute the current members of the
Compensation Committee of the Board of Directors: John W. Miller, Jr., Edward
H. Owlett and L. J. Rowell, Jr. Mr. Owlett is a member of a law firm that
furnished legal representation to the Company and its subsidiaries during
1999. In the opinion of the Company's management, the amounts paid to his
firm represented reasonable charges for the services rendered and were as fair
as the charges would have been had such services been furnished by law firms
unaffiliated with him.

11
<PAGE>

The following Report of the Compensation Committee and the Performance
Graph on page 15 have been prepared solely for purposes of this Proxy Statement.
Neither the report nor the graph shall be incorporated, in whole or in part, in
any other Company filing under the Securities Act of 1933 and the Securities
Exchange Act of 1934.

REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES ON THE
COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 1999

The Compensation and Stock Option Committees of the Board of Directors
make decisions regarding the aggregate compensation of the Company's executive
officers in the form of base salaries, cash bonuses and stock option awards.
The members of the Compensation Committee for the year ended December 31, 1999
were John W. Miller, Jr., Edward H. Owlett and L. J. Rowell, Jr., none of whom
are officers or employees of the Company or its subsidiaries. Messrs. Miller
and Rowell also are the members of the Stock Option Committee.

In 1999, the Chairman of the Board received a salary in accordance with his
employment agreement with the Company described above under "Compensation of
Executive Officers -- Employment Agreements." In this report, we have discussed
the Company's compensation policies and compensation paid to the Company's other
executive officers.

The Committees have implemented compensation policies that are intended to
support the Company's overall objective of enhancing value for our shareholders.
In addition, the Company's compensation policies are designed to align executive
compensation with the Company's long-term business objectives and performance
and to enable the Company to attract, retain and motivate executive officers
whose leadership and contributions are critical to the Company's long-term
success. In furtherance of these objectives, the Company's compensation program
for executive officers includes the following elements:

o Pay base salaries to executive officers that are competitive with base
salaries paid by similarly sized United States insurance and
reinsurance companies ("Peer Companies") for comparable executive
positions.

o Reward the Company's executive officers through incentive cash bonuses
based on pre-established, objective performance criteria related to
the financial results of the Company and the business segment under
each executive officer's direct management, and also taking into
account the executive officer's individual leadership, strategic
management and contribution to the Company's success.

o Provide additional long-term incentive to executive officers and align
their interests with the shareholders' interests through the granting
of stock-based compensation.

o Compensate the Company's executive officers on an equitable basis
taking into consideration each individual's degree of responsibility
and contribution to the achievement of the Company's overall
objectives.

In 1999, the Company had three components for the compensation paid to its
executive officers: base salary, an annual incentive cash bonus and stock
options. The Committees considered and determined each element separately and
collectively to ensure that the executive officers were appropriately
compensated consistent with our basic compensation principles. In making these
decisions, the Committees reviewed survey data of the compensation paid by other
insurers and by reinsurers generally and the Peer Companies for comparable
executive positions. The Committees target each executive's

12
<PAGE>

aggregate compensation to the mean of the aggregate compensation paid by the
Peer Companies for comparable executive positions.

We have discussed in the following section the three elements of
compensation for each of the executive officers in fiscal 1999, other than the
President and Chief Executive Officer, who is discussed subsequently in the body
of this report.

Base Salary

In 1999, the President and Chief Executive Officer of the Company
recommended to the Compensation Committee a base salary for the executive
officers, other than himself. In determining base salary, the Compensation
Committee considered the Chief Executive Officer's recommendation, each
executive officer's value to the Company, his experience in the industry and
performance with the Company. The Compensation Committee also considered the
base salary levels in effect for comparable executive positions with the Peer
Companies. Based upon its review of these factors, the Compensation Committee
decided to keep each executive officer's base salary level with 1998.

Cash Bonus

For the year ended December 31, 1999, the Compensation Committee had set
various pre-established, objective performance-based goals for the payment of
incentive cash bonuses to each of the executive officers. After the end of the
1999 fiscal year, the Compensation Committee evaluated each executive officer's
performance and also reviewed the total cash compensation paid by the Peer
Companies for comparable executive positions. The Compensation Committee
determined that each of the executive officers had met his overall performance
goals and that incentive cash compensation equal to the targeted cash bonuses
should be paid to the executive officers in recognition of their achievements
during fiscal year 1999. The total cash compensation for the Company's
executives for fiscal year 1999 did not exceed the mean cash compensation paid
by the Peer Companies for comparable executive positions.

Stock Options

The Stock Option Committee administers the Company's previously approved
stock option plans. The Committee believes that the executive officers should
have the opportunity to own Class A Common Stock of the Company to align their
interests with the Company's shareholders. Stock options provide this
opportunity and also add an additional long-term incentive to executive officers
and other key employees to further the Company's growth, development and
financial success. The Stock Option Committee has a policy of considering annual
grants under the stock option plans to executive officers.

In 1999, the Stock Option Committee granted options under the stock option
plans to key employees of the Company to purchase 427,000 shares of Class A
Common Stock, of which 90,000 options were granted to executive officers. In
making these grants, the Stock Option Committee considered the number of options
remaining available for grants under the stock option plans, the aggregate
amount of options previously granted and the amount of options previously
granted to each of the executive officers. All of the options granted in 1999 to
the executive officers were at an exercise price that was greater than the fair
market value of the Class A Common Stock on the date of grant. Options granted
in 1999 vest over a four-year period.

Compensation of the President and Chief Executive Officer

Mr. Smithson has an employment contract with the Company which currently
expires March 31, 2002, and is subject to automatic one-year extensions if Mr.
Smithson is re-elected President of the Company at each annual organizational
meeting of the Board of Directors. The contract requires the Company to pay Mr.
Smithson a salary of not less than $670,000 per year. In evaluating Mr.
Smithson's

13
<PAGE>

base salary for fiscal year 1999, the Committee considered a variety of factors,
including the Company's performance since Mr. Smithson became President and
Chief Executive Officer, his long-term contributions to the Company, his
strategic leadership, his stature in the insurance industry and his ongoing
value to the Company and its shareholders. The Committee also reviewed the base
salary that the Peer Companies pay to their chief executive officers, and the
percentage relationship between base salary and short- and long-term incentive
compensation. Based upon all of these factors, the Committee concluded to
continue Mr. Smithson's base salary at $700,000 per year for fiscal year 1999.

For the year ended December 31, 1999, Mr. Smithson received an incentive
cash bonus of $550,000 in recognition of his achieving certain of the
pre-established objective performance goals that the Compensation Committee had
set for him, including targeted increases in gross written premiums and pre-tax
operating income. The Compensation Committee also considered Mr. Smithson's
leadership of the Company, the continuing development of the Company's
reinsurance business, the continuing improvement in the PMA Insurance Group's
performance, the growth of Caliber One Indemnity Company and Mr. Smithson's
strategic vision and commitment to the Company. The aggregate compensation paid
to Mr. Smithson for fiscal year 1999 did not exceed the mean amount paid to
chief executive officers by the Peer Companies.

The Stock Option Committee also approved the award to Mr. Smithson of
options to purchase 55,000 shares of Class A Common Stock pursuant to the
Company's stock option plans at an exercise price that was greater than the fair
market value of the Class A Common Stock on the date of grant. The vesting
schedule and other terms of all options granted to Mr. Smithson were the same as
described above for the other executive officers. These option awards were
intended to strengthen the relationship between Mr. Smithson's future
compensation opportunity and the creation of additional shareholder value.

Compliance with Internal Revenue Code Section 162(m)

The Company believes that all of the compensation paid by the Company to
its Chief Executive Officer and other executive officers qualified for a tax
deduction by the Company for fiscal year 1999. Beginning in fiscal year 2000,
the Company will become subject to the provisions of Section 162(m) of the
Internal Revenue Code, which generally disallows a tax deduction to public
companies for compensation of over $1 million paid to a company's chief
executive officer and the four most highly compensated executive officers other
than the chief executive officer. However, the statute exempts qualifying
performance-based compensation from the deduction limit if certain requirements
are met. The Company's Annual Incentive Plan, which you are being asked to
approve at the Annual Meeting, will permit the Company to comply with all of the
Section 162(m) requirements. Please see "Item 5" below for a summary of the
Company's Annual Incentive Plan.

The Compensation Committee The Stock Option Committee

John W. Miller, Jr. John W. Miller, Jr.
Edward H. Owlett L. J. Rowell, Jr.
L. J. Rowell, Jr.

14
<PAGE>
COMPARISON OF TOTAL RETURN ON THE COMPANY'S
CLASS A COMMON STOCK WITH CERTAIN INDICES

The following graph provides an indicator of cumulative total shareholder
return on the Company's Class A Common Stock for the period from February 5,
1998 to June 30, 1998, and each subsequent six-month period compared with the
cumulative total return of the Standard & Poors' 500 Stock Index (the "S&P
500"), the Standard & Poors' Property/Casualty Insurance Index (the "S&P P/C")
and the Standard & Poors' SmallCap Property/Casualty Insurance Index ("S&P Small
P/C") for the same periods. The graph assumes that with respect to the Company's
Class A Common Stock, the S&P 500, the S&P P/C and the S&P Small P/C, $100 was
invested on February 5, 1998, and all dividends were reinvested.

Cumulative Total Return

[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
02/05/1998 06/30/1998 12/31/1998 06/30/1999 12/31/1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
S&P 500 $ 100.00 $ 116.41 $ 127.17 $ 142.91 $ 153.93
S&P P/C 100.00 106.99 94.83 92.38 70.54
S&P Small P/C 100.00 120.00 101.22 87.57 69.31
PMA Capital * 100.00 144.47 124.01 131.51 128.26
- ----------
</TABLE>
* The Company's Class A Common Stock commenced trading on The Nasdaq Stock
Market effective on February 5, 1998. Prior to that date, the Company's stock
price was based upon over-the-counter bid quotations, which reflect interdealer
prices, without retail mark-up, mark-down or commission, and may not have
represented actual transactions.

CERTAIN TRANSACTIONS

The Company's largest shareholder is PMA Foundation, which is a
not-for-profit corporation qualified under Section 501(c)(6) of the Internal
Revenue Code and whose purposes include the promotion of the common business
interests of its members and the economic prosperity of the Commonwealth of
Pennsylvania. As of February 21, 2000, PMA Foundation owned 4,561,225 shares of
Common Stock and 912,225 shares of Class A Common Stock, which entitles PMA
Foundation to cast 34.7% of the total number of votes available to be cast in
matters brought before the Company's shareholders. All of the members of the
Company's Board of Directors currently serve as the members of PMA Foundation's
Board of Trustees. Also, Frederick W. Anton III, Chairman of the Company, serves
as President and Chief Executive Officer of PMA Foundation. The Company and
certain of its subsidiaries provide certain administrative services to PMA
Foundation for which the Company and its affiliates receive

15
<PAGE>

reimbursement. Total reimbursements in 1999 amounted to $13,000. PMA Foundation
also leases its Harrisburg, Pennsylvania headquarters facility from a subsidiary
of the Company under a monthly operating lease presently requiring rent payments
of $25,000 per month and reimburses a subsidiary of the Company for its use of
office space in the Blue Bell, Pennsylvania facility. In 1999, PMA Foundation
paid $304,000 in rent and related reimbursements to the Company's affiliates.

James F. Malone III, A. John May, Edward H. Owlett and Joseph H. Foster,
who are directors of the Company, are or have been members of law firms that
furnished legal representation to the Company and its subsidiaries during 1999.
In the opinion of the Company's management, the amounts paid to such firms
represented reasonable charges for the services rendered and were as fair as the
charges would have been had such services been furnished by law firms
unaffiliated with any of the directors. No fees paid to the directors' law firms
exceeded five percent of their law firms' gross revenues, except for
approximately $1 million in legal fees paid to Mr. Malone's law firm.

Prior to 2000, the Company had provided demand loans to executive officers
of the Company and its subsidiaries, for the purpose of providing such executive
officers with funds to purchase Common Stock or Class A Common Stock. The loans
were collateralized by the Common Stock or the Class A Common Stock purchased by
the executive officer. During 1999, Francis W. McDonnell, the Company's Senior
Vice President, Chief Financial Officer and Treasurer, had $153,088 outstanding
under a Company demand loan, which was also the largest amount outstanding
during the year. Mr. McDonnell paid off this loan in February, 1999 with funds
from the executive loan program described below.

The Company has arranged an executive loan program with a financial
institution. The institution provides personal demand loans to officers of the
Company and its subsidiaries collateralized by Common Stock and Class A Common
Stock beneficially owned by the officer and a treasury security of a Company
subsidiary. The Company has agreed to purchase any loan made to an officer
(including accrued interest and related expenses) from the financial institution
in the event that the borrower defaults on the loan. In such a case, the Company
has recourse against the officer and the financial institution will assign all
of the officer's collateral securing the loan to the Company. Mr. McDonnell had
$536,088 outstanding under the loan program at December 31, 1999, which was the
largest amount outstanding during the year, at a floating interest rate equal to
the financial institution's prime rate minus 1/2%.

Subsidiaries of the Company, in the ordinary course of their business, have
had and intend to continue to have insurance transactions with directors and
officers of the Company and the various businesses with which directors and
officers of the Company are associated. The insurance is written in accordance
with rates and terms authorized for use in the applicable jurisdictions.

ITEM 2. PROPOSAL TO APPROVE RECLASSIFICATION OF COMMON STOCK

On February 2, 2000, the Board of Directors approved, subject to certain
conditions described below, proposed amendments to Articles 5 and 6 of the
Company's Amended and Restated Articles of Incorporation ("Articles of
Incorporation") to:

1. eliminate the current class of Common Stock from the Company's
authorized capital and to provide for the conversion and
reclassification of each share of the issued Common Stock, $5.00 par
value per share, into one share of Class A Common Stock, $5.00 par
value per share, and

2. delete Article 6 of the Articles of Incorporation, which provides
certain preemptive rights to the holders of Common Stock.

These amendments to the Articles of Incorporation are referred to as the
"Reclassification Amendment." The Board decided to present the Reclassification
Amendment to shareholders as a single proposal because the elimination of the
Common Stock, if approved by shareholders, would make Article

16
<PAGE>

6 of the Articles of Incorporation no longer necessary, since it only defines
rights with respect to the Common Stock. If the Reclassification Amendment is
properly approved, the Board intends to delete certain provisions of the
Company's Bylaws, which relate solely to the Common Stock, because they also
would be no longer necessary. See "Effects of Reclassification Amendment and
Comparison of Common Stock and Class A Common Stock" below.

In addition to the Reclassification Amendment, the Board, subject to
certain conditions described below, approved further amendments to the Articles
of Incorporation to authorize the issuance of up to 2,000,000 shares of
undesignated Preferred Stock, $.01 par value per share, and to eliminate
cumulative voting rights. The amendments to authorize preferred stock and
eliminate cumulative voting rights are referred to as the "Shareholder
Protection Amendments" and constitute separate proposals to be voted upon by
shareholders. See "Item 3 -- Proposal to Authorize Preferred Stock" and "Item 4
- -- Proposal to Eliminate Cumulative Voting."

The Board determined that the Reclassification Amendment and Shareholder
Protection Amendments are advisable and in the Company's best interests and
directed that the proposed amendments be considered for shareholder approval at
the Annual Meeting. The Board has conditioned its approval and implementation of
these amendments on shareholder approval at the Annual Meeting of both the
Reclassification Amendment as stated in this Item 2 and the Shareholder
Protection Amendments as stated in Items 3 and 4. In other words, the
Reclassification Amendment and the Shareholder Protection Amendments can only
become effective if shareholders approve all of the proposals contained in Items
2, 3 and 4. If shareholders do not approve each of the proposals in Items 2, 3
and 4, the Company's current Articles of Incorporation and Bylaws will remain in
effect.

The Board has further conditioned its approval of the Reclassification
Amendment on receiving the affirmative class vote of two-thirds of the votes
entitled to be cast by the holders of Common Stock. For a further discussion of
the vote requirement to approve the Reclassification Amendment, see "Vote
Requirement" below.

The text of the Reclassification Amendment and Shareholder Protection
Amendments to Article 5 of the Articles of Incorporation is set forth in a
restatement of Article 5, which is attached as Annex A. You should carefully
review the restated Article 5. You are also encouraged to review Articles 5 and
6 of the Company's present Articles of Incorporation, which sets forth the
relative rights and privileges of the Common Stock and Class A Common Stock, the
text of which is attached as Annex B. All statements contained in this Proxy
Statement with respect to the Reclassification Amendment and Shareholder
Protection Amendments and the rights and privileges of the existing classes of
capital stock are qualified by reference to Annexes A and B.

Background

The Articles of Incorporation currently authorize the Company to issue
40,000,000 shares of Common Stock, $5.00 par value per share, and 40,000,000
shares of Class A Common Stock, $5.00 par value per share. As of the record date
of this Annual Meeting, March 6, 2000, there were outstanding 12,419,178 shares
of Common Stock and 9,857,089 shares of Class A Common Stock. In addition, there
were 436,007 shares of Common Stock and 1,730,671 shares of Class A Common Stock
in treasury, and 16,084,479 shares of Class A Common Stock reserved for issuance
upon the exercise of options and conversions of the Common Stock. The Company's
Class A Common Stock is traded on The Nasdaq Stock Market. Currently, there is
no public trading market for the Common Stock.

Prior to 1987, the Company had one class of common stock. The Common Stock
was entitled to one vote per share on all matters submitted to shareholders, and
shareholders were permitted to cumulate votes in the election of directors. The
Company's Bylaws restricted ownership of the Common Stock to a limited group of
qualified persons and entities, and restricted the transfer of shares of Common
Stock to

17
<PAGE>

persons within that limited group. See "Effects of Reclassification Amendment
and Comparison of Common Stock and Class A Common Stock." In addition, the
Bylaws provided that no person, firm, association, corporation or other entity,
except PMA Foundation, could at any time hold more than 7% of the outstanding
shares of Common Stock of the Company.

In 1987, the Company's Articles of Incorporation were amended and restated
to authorize a dual class of common stock consisting of the previously existing
class of Common Stock and a new class designated as Class A Common Stock. The
Articles of Incorporation further provided that shares of Common Stock were
convertible into shares of Class A Common Stock on a one-for-one basis. At the
time of the creation of the Class A Common Stock, the Company's Bylaws were also
amended and restated to retain all of the restrictions on ownership and
transferability of the Common Stock. On the other hand, the Bylaws did not
create any restriction on the ownership and transferability of the Class A
Common Stock.

Shares of Class A Common Stock were initially distributed in 1987 to the
holders of Common Stock as a stock dividend at the rate of two-tenths of a share
of Class A Common Stock for each share of Common Stock held. In 1997, the
Company registered the Class A Common Stock pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and listed the
Class A Common Stock on The Nasdaq Stock Market. The Company has neither
registered the Common Stock under the 1934 Act nor listed it on Nasdaq or any
other exchange, and ownership and transferability of the Common Stock remain
restricted by the Company's Bylaws as further described below.

Reasons for the Reclassification

The Board of Directors has determined that it is in the Company's best
interests to reclassify and convert its Common Stock into one class consisting
of the Class A Common Stock for the following reasons:

o Approval of the Reclassification Amendment will simplify the Company's
capital structure.

o The conversion of the Common Stock into Class A Common Stock would
also increase the number of outstanding shares of Class A Common Stock
from 9,857,089 shares to 22,276,267 shares, based on the number of
shares outstanding on March 6, 2000. This may create a more liquid
trading market for the Class A Common Stock. The Company cannot
predict, however, what effect, if any, the Reclassification Amendment
may have on the liquidity or market prices of the Class A Common
Stock.

o If a more liquid trading market develops for the Class A Common Stock,
the Company may have better access to capital markets if it were to
decide in the future to raise additional capital through an offering
of Class A Common Stock or some other form of equity or debt security.
The Company has no present plan or intention to raise additional
capital through any such offering, and no assurance can be given that
the Company will be able to access the capital markets in the future
in the amounts and under terms and conditions that it would find
acceptable.

In considering and approving the Reclassification Amendment, the Board
determined that the one-to-one conversion ratio was appropriate particularly in
light of the current conversion rights of the Common Stock.

18
<PAGE>
Effects of Reclassification Amendment and Comparison of Common Stock and Class
A Common Stock

The comparison of the Common Stock and Class A Common Stock provided below
is qualified by the express terms of the Common Stock and the Class A Common
Stock, which are set forth in Articles 5 and 6 of the Company's Articles of
Incorporation attached to this Proxy Statement as Annex B.

Restrictions on Ownership of Common Stock

Currently: Under Section 2.1 of Article 2 of the Company's Bylaws, no
person, firm, association, corporation or other entity is qualified to own any
shares of Common Stock except:

o PMA Foundation;

o a member of PMA Foundation;

o a former member of PMA Foundation who resigned in good standing but
only in respect to Common Stock owned by such former member on the
date of resignation;

o the Company or Pennsylvania Manufacturers' Association Insurance
Company ("PMAIC");

o an officer, proprietor or partner of a member of PMA Foundation, or a
retired officer, proprietor or partner of a member or former member,
but only in respect to Common Stock owned on the date of retirement;

o a director or officer of the Company, PMAIC or PMA Foundation;

o a retired director or officer of the Company, PMAIC or PMA Foundation,
but only in respect to the Common Stock owned on the date of
retirement;

o a surviving spouse of a deceased person who, at the time of his or her
death, was qualified to own Common Stock, other than by reason of this
subparagraph;

o a person, firm, association, corporation or other entity who was a
shareholder of record of PMAIC on April 1, 1982;

o any child or grandchild of a shareholder of PMAIC of record on April
1, 1982;

o a trustee under a written trust solely for the benefit of a person
qualified under the Company's Bylaws to own Common Stock or a spouse,
child or grandchild of such qualified person; and

o such other classes of persons as are from time to time approved by the
Board of Directors of the Company. Pursuant to the Bylaws, the Board
of Directors has authorized the following other classes of persons to
own shares of Common Stock: (i) employees of the Company or any of its
affiliates who are not officers of these entities, but whose duties
require the exercise of executive and administrative responsibilities;
and (ii) a spouse of a person who owned Common Stock of record on
December 8, 1990.

Section 2.4 of the Company's Bylaws also provides that no person, firm,
association, corporation or other entity, except PMA Foundation, may at any time
hold more than 7% of the outstanding shares of Common Stock.

19
<PAGE>

Section 2.6 of the Company's Bylaws provides that if any shareholder ceases
to be qualified to own Common Stock under the Company's Bylaw provisions, or if
the executor or administrator of any shareholder, or the grantee or assignee of
any Common Stock sold on execution, or for debt, or as the result of bankruptcy
or insolvency proceedings, or if any person, firm, association, corporation or
other entity who is not qualified to own Common Stock under the Company's Bylaws
becomes the holder of Common Stock, then in any such case, unless a transfer of
such Common Stock is made to a qualified person within six months, such holder
will be required to offer to sell such Common Stock to PMA Foundation at a price
agreed upon by the holder and PMA Foundation, or by a committee of arbitrators
if the holder and PMA Foundation are unable to agree upon a price. If PMA
Foundation does not exercise its purchase rights, the Company has the right to
purchase such shares.

In addition, Sections 2.7 and 2.8 of the Bylaws provide for Common Stock
receipts and restrictive legends to be placed on certificates representing
shares of Common Stock. Finally, Section 22.1 of the Bylaws provides that
Article 2 of the Bylaws may not be altered, amended or repealed unless the
holders of two-thirds of the outstanding shares of Common Stock, voting as a
class, approve such action.

The foregoing restrictions and other provisions relating to the Common
Stock do not apply to shares of Class A Common Stock.

After the Reclassification: The Company's Bylaws will not impose any
transfer restrictions on the Company's Class A Common Stock, and the Class A
Common Stock will continue to trade on The Nasdaq Stock Market under the ticker
symbol--PMACA. Since the Reclassification Amendment will result in the
elimination of the Common Stock, Sections 2.1, 2.4, 2.6, 2.7, 2.8, and 22.1 of
the Bylaws will no longer be operative and will be removed from the Bylaws.
Therefore, voting for the approval of the Reclassification Amendment will also
have the effect of approving the repeal of these sections of the Bylaws.

Shares of Class A Common Stock received upon the reclassification of the
Common Stock will be considered "restricted securities" as that term is defined
under Rule 144 under the Securities Act of 1933, as amended. In general, Rule
144 provides that an affiliate (a person controlling, controlled by, or under
common control with, the Company) of the Company or a person who has
beneficially owned restricted securities for at least one year but less than two
years is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the then outstanding shares of the
class being sold and the average weekly trading volume of that class during the
four calendar weeks preceding the sale. For example, if the Reclassification
Amendment had become effective on the record date of this Annual Meeting, a
person described above would have been able to sell under Rule 144 -- 222,763
shares (1% of the shares outstanding) of Class A Common Stock during a
three-month period. Sales under Rule 144 are also subject to certain
manner-of-sale provisions, notice requirements and availability of current
public information about the Company.

A person who is not an affiliate of the Company and has not been one at any
time during the three months preceding a sale and who has beneficially owned
restricted securities for at least two years will generally be able to sell the
restricted securities without regard to the Rule 144 limitations described
above. The Company believes that a person who receives Class A Common Stock as a
result of the reclassification of Common Stock will generally be able to include
the period he or she held the Common Stock, as well as the period he or she
holds the Class A Common Stock, in determining whether he or she has met the
one-year or two-year holding period requirements under Rule 144.

Voting Rights

Currently: The holders of Common Stock are entitled to cast ten votes per
share of Common Stock owned. The holders of Class A Common Stock are entitled to
cast one vote per share of Class A Common Stock owned. Except as otherwise
required under Pennsylvania law, the Articles of

20
<PAGE>
Incorporation or the Bylaws, the holders of the Common Stock and Class A Common
Stock vote together without regard to class. Under the Company's present
Articles, holders of each class of stock are entitled to cumulative voting in
the election of directors.

After the Reclassification: All shareholders of the Company will hold Class
A Common Stock entitled to cast one vote per share. Because each Common Stock
holder will receive one share of Class A Common Stock for each share of Common
Stock held at the effective time of the reclassification, the reclassification
will generally dilute the voting power of the holders of Common Stock in their
capacity as holders of Class A Common Stock to be received pursuant to the
proposal. However, the reclassification will not affect the percentage equity
interest of a shareholder. If the Reclassification Amendment and Shareholder
Protection Amendments are approved, cumulative voting will be eliminated. See
"Item 4--Proposal to Eliminate Cumulative Voting."

The chart below shows the effect of the reclassification on the percentage
of total voting power, which includes the Class A Common Stock holdings, of
those shareholders known to the Company to have beneficially owned more than 5%
of the Common Stock on March 6, 2000:

Voting Power as of Voting Power after
Name of Beneficial Owner March 6, 2000 Reclassification
- ------------------------ ------------- ----------------

PMA Foundation 34.7% 24.6%
James F. Malone III 6.6% 5.6%
Edward H. Owlett 4.9% 3.9%

For more information on the shareholdings of these beneficial owners, see
"Beneficial Ownership of Common Stock and Class A Common Stock."

Dividends and Distributions

Currently: The holders of the Class A Common Stock are entitled to receive
cash dividends at a rate that is at least 10% higher on a per share basis than
the cash dividends paid on shares of Common Stock. Each share of Common Stock
and Class A Common Stock has equal rights with respect to dividends and
distributions paid in the form of stock or other property of the Company.

After the Reclassification: The holders of Common Stock will own Class A
Common Stock, and therefore, will experience an increase in their interest in
the aggregate future cash dividends that may be paid on the Company's Class A
Common Stock. Although the Company currently intends to maintain its annual
dividend payment on the Class A Common Stock of $.36 per share after the
reclassification, there is no guarantee that the Company will continue to pay
dividends at that rate or at all.

Convertibility

Currently: A holder of a share of Common Stock may convert it at any time
into one fully paid and nonassessable share of Class A Common Stock. Shares of
Class A Common Stock are not convertible into shares of Common Stock.

After the Reclassification: Each share of Common Stock will be reclassified
and converted into one share of Class A Common Stock.

Preemptive Rights of Common Stock

Currently: The holders of Common Stock are entitled to preemptive rights to
subscribe for and purchase any part of any new issuance for cash of Common Stock
or securities convertible or exercisable

21
<PAGE>

for Common Stock, except for Common Stock or other convertible securities that
are issued in connection with any stock purchase plan, stock option plan or
similar benefit plan approved by holders of a majority of the Common Stock. The
holders of Class A Common Stock are not entitled to preemptive rights.

After the Reclassification: No shareholder will be entitled to
preemptive rights.

Other Rights

Except as described above and as set forth in the Company's Articles of
Incorporation, each share of Common Stock and each share of Class A Common Stock
currently has identical powers, preferences and rights, including rights in
liquidation.

Certain Other Effects of the Reclassification

Number of Shares Outstanding; Effect on Market Price

Upon the effectiveness of the reclassification, approximately 12,419,178
additional shares of Class A Common Stock will be outstanding based on shares
outstanding on March 6, 2000. The Company cannot predict what effect, if any,
the reclassification will have on the market price of the Class A Common Stock.

Tax Consequences

The following discussion is intended only as a brief summary of the federal
income tax consequences of the Reclassification Amendment, as based on the
Internal Revenue Code of 1986, as amended, currently in effect (the "Code").
This summary is not meant to be exhaustive and does not describe state, local,
foreign or other tax consequences. You should consult your own tax advisor with
respect to the tax consequences of the proposed Reclassification Amendment,
including tax reporting requirements and tax consequences under state, local or
foreign law.

Tax counsel has advised the Company that the reclassification of shares of
Common Stock into shares of Class A Common Stock pursuant to the
Reclassification Amendment will be treated as a tax-free recapitalization under
Section 368(a)(1)(E) of the Code, and therefore, (i) will not result in the
recognition of any gain or loss by the holders of Common Stock, (ii) the basis
of the Class A Common Stock received by a shareholder as a result of the
reclassification will be the same as the shareholder's basis in the Common Stock
converted in the reclassification, and (iii) the holding period of the Class A
Common Stock received by a shareholder as a result of the reclassification will
include the shareholder's holding period for the Common Stock converted in the
reclassification, provided that each share of the Common Stock held on the
effective date of the reclassification is a capital asset as defined in section
1221 of the Code.

No Dissenters' Rights

Holders of Common Stock will not be entitled to dissenters' rights in
connection with the Reclassification Amendment.

Accounting

The Reclassification Amendment will not have a material effect on the
Company's financial condition.

22
<PAGE>

Conversion of Shares

If the Reclassification Amendment and the Shareholder Protection Amendments
described in Items 3 and 4 are approved by the necessary votes, the Company
intends to prepare and file as soon as practicable with the Pennsylvania
Department of State, Articles of Amendment to the Articles of Incorporation of
the Company containing the Reclassification Amendment and Shareholder Protection
Amendments as set forth in Annex A. The Reclassification Amendment and
Shareholder Protection Amendments will become effective at 5 p.m. (Eastern Time)
on the close of business on the day of filing with the Pennsylvania Department
of State. Upon effectiveness, no further action by the Company or its
shareholders is required; each issued and outstanding share of Common Stock will
automatically be converted into one share of Class A Common Stock.

Stock Certificates

If the Reclassification Amendment is adopted and becomes effective, the
certificates representing the Common Stock will automatically become
certificates representing the Class A Common Stock. Shareholders will not be
required to exchange their existing certificates for new certificates.

Vote Requirement

Approval of the Reclassification Amendment will require both:

(i) the affirmative vote of holders of at least two-thirds of
the outstanding shares of Common Stock, voting separately as a class, and

(ii) the affirmative vote of holders of at least a majority of the
outstanding shares of Common Stock and Class A Common Stock, voting
together without regard to class.

Abstentions and broker non-votes will have the same effect as a negative vote
with respect to this proposal.

The Board of Directors recommends that you vote FOR the approval of the
Reclassification Amendment.

ITEMS 3 AND 4. SHAREHOLDER PROTECTION AMENDMENTS

Background

In addition to the Reclassification Amendment described above in Item 2, on
February 2, 2000, the Board of Directors approved, subject to certain conditions
described below, the Shareholder Protection Amendments. The Board has
conditioned its approval and implementation of the Reclassification Amendment
described in Item 2 and both of the Shareholder Protection Amendments described
in Items 3 and 4 on receiving shareholder approval of each proposal at the
Annual Meeting. In other words, the Reclassification Amendment and the
Shareholder Protection Amendments can only become effective if shareholders
approve all of the proposals contained in Items 2, 3 and 4 of this Proxy
Statement. If shareholders do not approve each of the proposals in Items 2, 3
and 4, the Company's current Articles of Incorporation and Bylaws will remain in
effect.

The Shareholder Protection Amendments propose to: (1) authorize the Company
to issue 2,000,000 shares of undesignated Preferred Stock, $.01 par value per
share, and (2) eliminate cumulative voting rights in the election of directors.

The text of the Reclassification Amendment and the Shareholder Protection
Amendments to Article 5 of the Articles of Incorporation is set forth in a
restatement of Article 5, which is attached as Annex A.

23
<PAGE>

You should carefully review the restated Article 5. All statements contained in
this Proxy Statement with respect to the Reclassification Amendment and
Shareholder Protection Amendments are qualified by reference to Annex A.

Reasons for the Shareholder Protection Amendments

The Company's current capital structure, including the restrictions on
ownership and transfer of the Common Stock described above in Item 2, contains
certain protections against hostile and coercive takeover attempts against the
Company. See "Item 2. Proposal to Approve the Reclassification of Common
Stock--Effects of Reclassification Amendment and Comparison of Common Stock and
Class A Common Stock." However, the Company believes that if the
Reclassification Amendment is approved, the Company should have new measures in
place to protect itself and its shareholders in the event of a future hostile or
coercive takeover attempt.

Accordingly, if the Reclassification Amendment is approved, the Board of
Directors believes it is appropriate, and in the Company's best interests, to
adopt various defensive measures, which publicly traded companies frequently
have in place, to protect the Company from unsolicited takeover attempts. These
new measures include adopting a shareholder rights plan, eliminating cumulative
voting and adopting certain amendments to the Bylaws. The shareholder rights
plan is discussed in Item 3 in connection with the authorization of Preferred
Stock, and the elimination of cumulative voting is the subject of Item 4 below.
The anti-takeover effects of the existing provisions of the Company's Articles
and Bylaws and the planned amendments to the Bylaws to include additional
defensive measures are discussed below.

The Shareholder Protection Amendments discussed below in Items 3 and 4 are
not in response to any efforts of which the Company is aware to accumulate the
Company's stock or to obtain control of the Company. The Board believes,
however, that it is appropriate to act on the Shareholder Protection Amendments
at the Annual Meeting when the Reclassification Amendment is being voted on by
the shareholders and when the Shareholder Protection Amendments can be
considered carefully, rather than in the midst of any takeover attempt that
might be undertaken at some future time.

Anti-Takeover Effects of Articles and Bylaw Provisions

Existing Provisions

The Company's Articles of Incorporation and Bylaws currently contain
certain provisions that may have the effect of delaying, deferring or making
more expensive or difficult a change in control of the Company. Such provisions
include (a) the dual class of common stock, (b) certain advance notice
requirements for corporate action, (c) a classified Board of Directors and (d) a
prohibition on removal of directors other than for cause, except by unanimous
action of the shareholders to remove the entire Board of Directors.

Dual Class of Common Stock
--------------------------

As described in Item 2, the Company's current capital structure provides
for Common Stock entitled to ten votes per share and Class A Common Stock
entitled to one vote per share. In addition, the Company's Bylaws provide that a
holder of Common Stock can only transfer the Common Stock to certain third
persons described in the Bylaws, who are eligible to own the shares, and no
person other than PMA Foundation may own more than 7% of the Common Stock. The
Bylaws require approval by the holders of two-thirds of the outstanding Common
Stock, voting as a class, to repeal these restrictions in the Bylaws. As of
March 6, 2000, the directors and executive officers of the Company and PMA
Foundation beneficially owned in the aggregate 58.2% of the outstanding Common
Stock and 32.3% of the outstanding Class A Common Stock, representing 55.8% of
the voting power of the Company's

24
<PAGE>

outstanding capital stock. As stated above in Item 2, if the Reclassification
Amendment is approved and implemented, these restrictive Bylaws relating to the
Common Stock will be repealed. For a further discussion of the Common Stock and
Class A Common Stock, see "Item 2-Proposal To Approve Reclassification Of Common
Stock-Effects of Reclassification Amendment and Comparison of Common Stock and
Class A Common Stock."

Advance Notice Provision
------------------------

The Bylaws provide that no person may be considered as a nominee for
election to the Board of Directors unless the Company receives written notice of
the candidacy not less than 60 days prior to the shareholders meeting at which
the election is to be held. This requirement does not apply to nominees
designated by the Board or a nominating committee of the Board. This provision
is designed to provide the Company with advance warning of a hostile attempt to
replace the Board or a class of the Board and time to evaluate and react to any
such effort.

Classified Board and Removal for Cause
--------------------------------------

The Board is currently divided into three approximately equal classes, and
the directors in each class are elected for a term of three years. The
classified Board may discourage shareholders from attempting to replace the
Company's entire Board of Directors through a proxy contest or otherwise. In
addition, the classified Board structure also could prevent a hostile acquirer's
ability to obtain control of the Board in a relatively short period of time
because it would generally take a hostile acquirer at least two annual meetings
of shareholders to elect a majority of the Board. A hostile acquirer's ability
to obtain control of the Board is further deterred because, pursuant to the
Company's Bylaws, the acquirer would need to show cause to remove any director,
unless the acquirer obtained the unanimous consent of all shareholders to remove
the entire Board.

Planned Bylaw Amendments

If the Reclassification Amendment is approved, the Board of Directors
believes that the resulting provisions of the Articles of Incorporation and
Bylaws would no longer provide adequate protection against unsolicited takeover
attempts. Therefore, the Board of Directors intends to approve the amendments to
the Company's Bylaws described below, if the Reclassification Amendment is
approved. These amendments would provide further assurance that the Board of
Directors, if confronted by an unsolicited acquisition proposal from a third
party, will have adequate time to review any proposal and to consider
appropriate alternatives to the proposal. They would also provide the Board with
the adequate time to act in what it believes to be the best interests of the
Company by taking into consideration, as permitted under Pennsylvania corporate
law, the effects of any proposal on any or all groups affected by the proposal,
the short- and long-term interests of the Company, the resources, intent and
conduct of the potential acquirer and all other pertinent factors. The Board has
the authority to and intends to adopt the following Bylaw amendments without
shareholder approval, and you are not being asked to vote on them.

Special Meetings
----------------

The Board intends to delete the current provision of the Bylaws that
permits holders of at least 20% of the votes entitled to be cast at a particular
meeting to call a special meeting of shareholders. Conducting shareholder
meetings is very costly and time-consuming and distracts management from the
day-to-day operation of the business. The Board believes that it is in the best
position to determine if circumstances warrant calling a special meeting of
shareholders. Although deleting this provision will have the effect of
precluding the call of a special meeting for shareholder consideration of a
proposal to which the Board is opposed, the Board believes that shareholders are
provided a full opportunity to make proper proposals at a duly convened annual
meeting and that any such proposals should be presented for consideration to
other shareholders in the Company's annual proxy statement.

25
<PAGE>
Additional Advance Notice Provisions
------------------------------------

The Board intends to amend the current advance notice provision described
above relating to director nominees. Generally, the proposed amendment would
require prior written notice of a nominee for director to be received by the
Company not later than the close of business on the 60th day, nor earlier than
the close of business on the 90th day, prior to the annual anniversary of the
preceding year's annual meeting of shareholders. If the Board calls a special
meeting to elect directors, the notice must be received not later than the close
of business on the 60th day, nor earlier than the close of business on the 90th
day, prior to the date of the special meeting. The amendment would also require
certain information be specified in the notice about the proponent and nominees,
including the information required under the 1934 Act's proxy rules relating to
nominees for director.

The Board also intends to adopt a Bylaw provision requiring a shareholder
to give advance notice of any shareholder business proposed to be brought before
an annual meeting of shareholders. Generally, the notice must be received not
later than the close of business on the 60th day, nor earlier than the close of
business on the 90th day, prior to the annual anniversary of the preceding
year's annual meeting of shareholders. The notice must contain certain
information about the proponent and the business to be proposed at the meeting.

The advance notice provisions are designed to provide the Company with
advance warning of a threatened proxy contest in connection with the election of
directors and any other matters to be considered at a meeting of shareholders.
Although these provisions do not give the Board or the Chairman of the meeting
any powers to approve or disapprove such shareholder nominees or other matters
to be considered at the meeting, unless the notice provisions are followed, a
shareholder will be prohibited from raising such matters at the meeting. Thus,
the provisions may have the effect of (i) precluding consideration of nominees
for director other than those proposed by a nominating committee of the Board
and of other matters at a particular meeting or (ii) discouraging or deterring a
third party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company.

Shareholder Consents
--------------------

The Board intends to delete the current Bylaw provisions that permit
shareholders to act by written consent, including by consent of shareholders
holding only a majority (rather than all) of the voting power, and to adopt a
Bylaw to restrict such action. Deleting these provisions means that shareholders
would be allowed to act only at an annual or special meeting. Requiring that
shareholder action must be taken at a duly convened meeting of shareholders
ensures that all shareholders will have notice and the opportunity to consider
any matter that could affect their rights. The Board believes that it is in the
best interest of the shareholders and the Company to require full consideration
of a matter at a meeting of shareholders before acting on it. Deleting the
shareholder consent provisions is intended to provide the Board and all
shareholders with an opportunity to review any proposed action and, if
necessary, to take any necessary action to protect the interests of minority
shareholders and the Company before the action is proposed to shareholders. By
eliminating the possibility of action by shareholder consent, a majority of the
incumbent Board could delay consideration of any action that requires
shareholder approval until an actual vote is taken at an annual meeting of
shareholders, even if the proponents of the action would have sufficient
shareholder votes to obtain approval of the action by written consent prior to a
shareholder meeting.

26
<PAGE>
ITEM 3. PROPOSAL TO AUTHORIZE PREFERRED STOCK

The Company's Articles of Incorporation currently authorize 40,000,000
shares of Common Stock, $5.00 par value per share, and 40,000,000 shares of
Class A Common Stock, $5.00 par value per share, but no shares of Preferred
Stock. On February 2, 2000, the Board of Directors approved, subject to certain
conditions described below, an amendment to Article 5 of the Company's Amended
and Restated Articles of Incorporation to authorize the Company to issue
2,000,000 shares of undesignated Preferred Stock, $.01 par value per share, and
to authorize the Board of Directors, without further shareholder approval, to
designate one or more series of Preferred Stock to be issued from time-to-time
and to establish the number of shares, rights, preferences, limitations and
special rights of each series of Preferred Stock. Therefore, the Board would
have the authority to determine the terms of the Preferred Stock, including
dividend or interest rates, conversion prices, voting rights, redemption prices,
maturity dates and similar matters. A series of Preferred Stock designated in
the future could have dividend, voting, liquidation and other rights that are
senior to the rights of the Class A Common Stock.

Reasons for the Preferred Stock Authorization

The Board of Directors believes that it is prudent and in the best
interests of the Company to authorize the shares of Preferred Stock to provide a
reserve of shares for potential issuance in connection with possible future
corporate actions. Such actions may include, but are not limited to, stock
splits or stock dividends, financings through the issuance of equity securities,
acquisitions of property or companies for stock and other corporate purposes. In
addition, because the Board of Directors will have the authority to vary the
rights, preferences, limitations and special rights of each series of Preferred
Stock without further shareholder approval, the Preferred Stock will enhance the
Company's ability to accomplish these actions. If the Preferred Stock were
available for issuance, the Company would avoid the delays and expense that
would be occasioned by having to obtain shareholder approval at the time of the
action.

Currently, there are no plans to use the Preferred Stock. However, if the
Reclassification Amendment is approved, the Board intends to adopt a shareholder
rights plan. In connection with the adoption of a shareholder rights plan, the
Board would designate a series of the Preferred Stock as Junior Participating
Preferred Stock. However, no shares of the Junior Participating Preferred Stock
will be issued and outstanding upon adoption of the shareholder rights plan. The
Junior Participating Preferred Stock would be issued only if the rights
distributed under a shareholder rights plan become exercisable upon an attempted
takeover of the Company and are exercised. See the description below of the
general terms of a shareholder rights plan and Junior Participating Preferred
Stock.

Possible Effects of the Preferred Stock Authorization

As previously stated, the Board of Directors has no present plan to issue
Preferred Stock. However, we have discussed below the possible effects of
issuing Preferred Stock in the future. If the Preferred Stock is authorized, the
Board of Directors will have the authority to issue shares of Preferred Stock
without further vote of the shareholders, except as may be provided under
Pennsylvania corporate law or under the rules of The Nasdaq Stock Market or any
other securities exchange on which shares of Class A Common Stock are then
listed. The Nasdaq rules currently require shareholder approval of the issuance
of any security convertible into common stock that will have upon issuance
voting power equal to or in excess of 20% of the voting power outstanding before
the issuance of the convertible security (or lower percentages in certain
cases).

Because the Board would have the authority to set the voting rights of any
series of Preferred Stock and holders of Class A Common Stock do not have
preemptive rights, the issuance of any shares of Preferred Stock in the future
may dilute the voting power of the outstanding shares of Class A Common

27
<PAGE>

Stock. However, the Nasdaq rules provide that the voting rights of existing
shareholders of publicly traded common stock registered under Section 12 of the
1934 Act, such as the Class A Common Stock, cannot be disparately reduced or
restricted through any corporate action or issuance. Therefore, any issuance of
Preferred Stock with greater per share voting rights than the Class A Common
Stock could result in a delisting of the Class A Common Stock from The Nasdaq
Stock Market. In addition, since the Board can set the dividend and liquidation
preferences of the Preferred Stock senior to the Class A Common Stock, any
issuance of Preferred Stock in the future could reduce the proportion of the
dividends and liquidation proceeds payable to the holders of the outstanding
shares of Class A Common Stock.

The Board of Directors could also use the authorized but unissued shares of
Preferred Stock as an "anti-takeover" device to create impediments to an
unwanted takeover or acquisition of control of the Company or its stock, such as
in connection with the shareholder rights plan. Accordingly, the authorization
of the Preferred Stock may deter a future takeover attempt that certain holders
of the Class A Common Stock may deem to be in their best interests or in which
holders of Class A Common Stock may be offered a premium for their shares over
the then market price for the Class A Common Stock. While authorizing Preferred
Stock may be deemed to have potential anti-takeover effects, the Board of
Directors is not aware of any attempt to takeover or acquire the Company or its
stock and the Preferred Stock authorization is not prompted by any specific
takeover or acquisition effort or threat.

Shareholder Rights Plan

The authorization of the Preferred Stock will facilitate the Board's
adoption of a shareholder rights plan, which would constitute an anti-takeover
device. If the Shareholder Protection Amendments and the Reclassification
Amendment are approved at the Annual Meeting, the Board intends to adopt a
shareholder rights plan at its next Board meeting, which it currently
anticipates will be held in May 2000. The Board believes adoption of a
shareholder rights plan is a reasonable and necessary measure to protect the
Company and its shareholders against the threat of a possible unsolicited and
coercive tender offer or proposal for the acquisition of the Company or its
stock. The Board of Directors believes that the adoption of a shareholder rights
plan is in the best interests of the Company and its shareholders because it
will enable the Board to have adequate time to evaluate any future unsolicited
takeover attempts, to consider alternatives to such an attempt, including a
response to open market purchase programs, and to negotiate acceptable terms for
the Company. The Company is not aware of any pending or potential offer or
proposal for the acquisition of the Company or its stock.

The Company is currently evaluating various provisions of shareholders
rights plans for consideration by the Board. However, the Company presently
anticipates that any shareholder rights plan the Board adopts would most likely
include the following types of provisions:

o On adoption of the shareholder rights plan, each shareholder would
receive, for each share of Class A Common Stock owned, a dividend
distribution of one right to purchase from the Company, once the right
becomes exercisable as described below, one one-thousandth (1/1000) of
a share of a series of Junior Participating Preferred Stock, for the
exercise price also described below.

o Each right would initially "attach" to, and not trade separately from,
each share of Class A Common Stock.

o The rights would "detach" from the Class A Common Stock and be
exercisable as of the date which is the earlier of (a) ten days after
the date (the "Shares Acquisition Date") on which a person or group of
affiliated or associated persons acquires beneficial ownership of
shares exceeding a specified level (generally between 10% and 20%) of
the outstanding Class A Common Stock ("Acquiring Person") (except
certain existing shareholders may be exempted

28
<PAGE>

from this restriction) and (b) ten business days after the
commencement of a tender or exchange offer that would result in the
acquisition of that level of ownership of Class A Common Stock.

o If issued, each one one-thousandth share of the Junior Participating
Preferred Stock will have voting rights equal to one share of Class A
Common Stock.

o Each one one-thousandth share of the Junior Participating Preferred
Stock issued upon exercise of a right will have dividend and
liquidation rights designed to result in a value that is the economic
equivalent of the value of one share of Class A Common Stock.

o The exercise price of a right will be in the range of three to six
times the market price of the Class A Common Stock on the date of the
adoption of the shareholder rights plan.

o After the Shares Acquisition Date, each right would be exercisable for
a number of shares of Class A Common Stock (in lieu of a fractional
share of Preferred Stock) that have a market value equal to twice the
exercise price of the right.

o If, after the Shares Acquisition Date, the Company merged with another
company or sold its assets, each right would be exercisable for a
number of shares of common stock of the entity that merged with, or
acquired the assets of, the Company, that have a market value equal to
twice the exercise price of the right.

o After the Shares Acquisition Date, but before an Acquiring Person
becomes the beneficial owner of 50% or more of the Class A Common
Stock, the Company may exchange one share of Class A Common Stock for
each right.

o Generally, any rights beneficially owned by an Acquiring Person would
not be exercisable or exchangeable for stock of either the Company or
the acquiring entity.

o The Company would have the right to redeem the rights at a price equal
to $.001 per right at any time prior to the Shares Acquisition Date.

Any shareholder rights plan adopted by the Board of Directors would be an
"anti-takeover" measure, as it would have the potential effect of significantly
increasing the cost to the acquiring person of an unsolicited tender offer for
or acquisition of the Company or its stock even if some or a majority of the
shareholders determined that such a transaction would be in their best
interests. In addition, a shareholder rights plan would preserve the power of
the Board of Directors to evaluate any offers to acquire the Company and to
consider a full range of responses in such an event. The Board of Directors has
the power under Pennsylvania corporate law to adopt a shareholder rights plan
without shareholder approval, and shareholders are not being asked to approve
any shareholder rights plan.

Vote Requirement

Approval of the amendment to authorize Preferred Stock will require both:

(i) the affirmative vote of holders of at least a majority of
the outstanding shares of Common Stock, voting separately as a class, and

(ii) the affirmative vote of holders of at least a majority of the
outstanding shares of Class A Common Stock, voting separately as a class.

Abstentions and broker non-votes will have the same effect as a negative vote
with respect to this proposal.

29
<PAGE>

The Board of Directors recommends that you vote FOR the approval of
the authorization of Preferred Stock.

ITEM 4. PROPOSAL TO ELIMINATE CUMULATIVE VOTING

On February 2, 2000, the Board of Directors approved, subject to certain
conditions described below, an amendment to Article 5 of the Company's Articles
of Incorporation to eliminate cumulative voting rights of shareholders.

The Company's Articles of Incorporation currently provide that shareholders
have the right to cumulate their votes in each election of directors. Cumulative
voting permits each shareholder entitled to vote in an election of directors to
multiply the number of votes that the shareholder is entitled to cast by the
total number of directors to be elected and to allocate those votes to one or
more of the nominees for director. Therefore, even shareholders with a minority
percentage of the outstanding shares, by aggregating (i.e. "cumulating") the
votes they are entitled to cast, may be able to elect one or more directors. In
contrast, without cumulative voting, each shareholder has only one vote per
share for each nominee.

Reasons for Eliminating Cumulative Voting

The Board of Directors believes that it is in the best interests of the
Company and its shareholders to amend the Articles of Incorporation to eliminate
cumulative voting as a measure to protect the Company from unsolicited takeover
attempts. The elimination of cumulative voting may prevent or render it more
difficult for a hostile acquirer with a minority ownership interest in the
Company to obtain representation on the Company's Board of Directors and further
interests that may be contrary to those of the majority of the shareholders.

Possible Effects of Eliminating Cumulative Voting

The elimination of cumulative voting will enable the holders of a majority
of the shares entitled to vote in an election of directors to elect all of the
directors being elected at that time, and consequently, will make it more
difficult for minority shareholders of the Company to obtain representation on
the Board of Directors. In addition, elimination of cumulative voting might,
under certain circumstances, render more difficult, or discourage, a merger or
tender offer that is not approved by the Board of Directors, a proxy contest or
the removal of incumbent management.

Vote Requirement

Approval of the amendment to eliminate cumulative voting will require both:

(i) the affirmative vote of holders of at least a majority of
the outstanding shares of Common Stock, voting separately as a class, and

(ii) the affirmative vote of holders of at least a majority of the
outstanding shares of Class A Common Stock, voting separately as a class.

Abstentions and broker non-votes will have the same effect as a negative vote
with respect to this proposal.

The Board of Directors recommends that you vote FOR the approval of the
elimination of cumulative voting.

30
<PAGE>

ITEM 5. PROPOSAL TO APPROVE THE ANNUAL INCENTIVE PLAN

Purpose of the Annual Incentive Plan

The Company's compensation policies are intended to support the Company's
overall objective of enhancing shareholder value. The Board of Directors
believes that there is a need to motivate and reward executives with competitive
compensation conditioned upon achievement of the Company's financial goals and
that the compensation should be paid in a manner that allows it to be a
deductible expense for the Company. To achieve these objectives, on February 2,
2000, the Board of Directors adopted, subject to approval by the shareholders,
the PMA Capital Corporation Annual Incentive Plan.

Summary Description of the Annual Incentive Plan

This summary describes the material terms of the Annual Incentive Plan. The
full text of the Annual Incentive Plan is attached as Annex C to this Proxy
Statement. We encourage you to read the Annual Incentive Plan as it is the legal
document that sets forth the terms of the Annual Incentive Plan. If adopted by
the shareholders, the Annual Incentive Plan will be effective as of January 1,
2000.

Under the Annual Incentive Plan, the Company may pay annual incentive
bonuses to certain executive officers of the Company only if annual performance
goals are achieved, and the incentive bonuses are intended to qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code. Qualification of the bonuses as "performance-based compensation" permits a
tax deduction for compensation over $1 million paid to the Chief Executive
Officer or any of the other four highest compensated executives named in the
proxy statement ("Named Executive Officers"). The Plan will be administered by
the Compensation Committee of the Board of Directors (the "Committee").

Participation in the Plan is mandatory for each executive officer
designated by the Committee. An executive officer will participate in the Plan
for a specified performance period. Unless otherwise specified by the Committee,
the performance period is a calendar year.

The Committee will establish written, objective performance goals for a
performance period generally within 90 days of the beginning of each performance
period. The performance goals must be stated by the Committee as specific
amounts of, or specific changes in, one or more of the following financial
measures: premiums, revenues, earnings, including operating earnings, earnings
per share, including operating earnings per share, shareholders' equity, return
on equity, assets, return on assets, capital, return on capital, book value,
economic value added, operating margins, cash flow, shareholder return,
expenses, expense ratios, loss ratios, underwriting results, debt-to-capital
ratio, or market share. In doing so, the Committee is authorized to specify any
reasonable definition of the financial measures it uses, and the definitions may
provide for reasonable adjustments and may include or exclude certain items.
Within a reasonable time after the close of a performance period, the Committee
will determine whether the performance goals for that performance period have
been met.

Participants are eligible to receive an award under the Incentive Plan only
if the Committee has certified in writing that the performance goals have been
met. The maximum award for each participant will equal no more than 200% of the
participant's base salary in effect on January 1 of the applicable performance
period. Even if the participants meet their performance goals, the Committee has
sole and absolute discretion to reduce or eliminate entirely the award to one or
more participants, and under no circumstances, may the Committee award a
participant more than the maximum award.

Except for certain leaves of absence and termination of employment on
account of retirement, death or disability, a participant must be continuously
employed by the Company from the beginning of the performance period to the date
of the award to be eligible to receive an award. The Committee may determine, in
its sole discretion, whether the payment of the award will be made immediately
or deferred

31
<PAGE>

until a later date or the occurrence of a particular event. A participant may
also voluntarily defer receipt of an award.

The Committee or the Board may amend the Plan at any time. However, an
amendment will not be effective without the prior approval of the shareholders
of the Company if such approval is necessary to continue to qualify the awards
as "performance-based compensation," or otherwise under Treasury or Securities
and Exchange Commission regulations, the rules of The Nasdaq Stock Market or any
other applicable exchange or any other applicable law or regulation. The
Committee or the Board may terminate the Plan at any time. Unless the Plan is
extended, no awards may be made under it for a performance period ending after
December 31, 2004.

Actual amounts that will be payable in the future under the Plan cannot be
determined at this time. The amount of awards under the Plan will depend upon
the performance goals established from time to time by the Committee, the
Company's performance during the applicable performance periods, and the
Committee's exercise of downward discretion in making awards. The bonuses that
were paid for 1999 to the Named Executive Officers under the Company's existing
bonus program, which is intended to be replaced by the Plan for the Named
Executive Officers and certain other executive officers, are summarized in the
Summary Compensation Table on page 8 of this Proxy Statement. The aggregate
amount of bonuses paid to all executive officers as a group under the existing
bonus program for 1999 was $1.44 million. The Company believes that all of the
compensation paid to the Company's executive officers qualified for a tax
deduction by the Company for fiscal year 1999.

Vote Requirement

Approval of the Annual Incentive Plan will require the affirmative vote of
the majority of the votes cast on the proposal at the Annual Meeting by the
holders of the outstanding shares of the Company's Common Stock and Class A
Common Stock, voting together without regard to class. Abstentions and broker
non-votes are not considered votes cast and will not have any effect on the vote
to approve the Annual Incentive Plan.

The Board of Directors recommends that you vote FOR the approval of the Annual
Incentive Plan.

32
<PAGE>
ITEM 6. RATIFICATION OF INDEPENDENT ACCOUNTANTS

The Board has appointed PricewaterhouseCoopers LLP as the Company's
independent accountants for the year ending December 31, 2000. Although not
required, the Board requests that you ratify this appointment. If you do not
ratify this appointment the Board will reconsider the appointment.

Representatives of PricewaterhouseCoopers LLP will attend the Annual
Meeting. They will be given an opportunity to make a statement and will be
available to respond to appropriate questions.

Ratification of the independent accountants will require the affirmative
vote of the majority of the votes cast on the proposal at the Annual Meeting by
the holders of outstanding shares of the Company's Common Stock and Class A
Common Stock, voting together without regard to class. Abstentions and broker
non-votes are not considered votes cast and will not have any effect on the vote
to ratify the appointment of independent accountants.

The Board of Directors recommends that you vote FOR this proposal.

ITEM 7. OTHER MATTERS

The Board of Directors does not know of any matters to be presented for
consideration at the Annual Meeting other than the matters described in this
Proxy Statement, but if other matters are presented, it is the intention of the
persons named in the accompanying proxy to vote on those matters in accordance
with their judgment.

SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE

Section 16 of the Securities Exchange Act of 1934 requires that the
officers and directors of the Company, as well as persons who own more than 10%
of a class of equity securities of the Company, file reports of their ownership
of such securities, as well as monthly statements of changes in such ownership,
with the Company and the Securities and Exchange Commission. Based upon written
representations received by the Company from its officers and directors and the
reports filed with the Company during 1999, the Company believes that all such
filings required during 1999 were made on a timely basis.

ANNUAL REPORT

A copy of the Company's 1999 Annual Report to Shareholders is being mailed
to the Company's shareholders with this Proxy Statement.

33
<PAGE>

SHAREHOLDER PROPOSALS

Any shareholder who, in accordance with and subject to the provisions of
the proxy rules of the Securities and Exchange Commission, wishes to submit a
proposal for inclusion in the Company's proxy statement for its 2001 Annual
Meeting of Shareholders must deliver such proposal in writing to the Company's
Secretary at the Company's principal executive offices at 1735 Market Street,
Suite 2800, Philadelphia, Pennsylvania 19103-7590, no later than November 23,
2000.

If a shareholder who intends to present a proposal at the 2001 Annual
Meeting of Shareholders does not notify the Company of the proposal on or before
February 6, 2001, then management proxies will use their discretionary voting
authority to vote on the proposal when the proposal is raised at the 2001 Annual
Meeting, even though there is no discussion of the proposal in the related proxy
statement.

By Order of the Board of Directors,

March 23, 2000

Frederick W. Anton III
Chairman of the Board

34
<PAGE>

ANNEX A

ARTICLES OF AMENDMENT TO AMENDED AND RESTATED ARTICLES OF
----------------------------------------------------------

INCORPORATION OF PMA CAPITAL CORPORATION
----------------------------------------

Article 6 of the Amended and Restated Articles of Incorporation of PMA
Capital Corporation (the "Corporation") is deleted in its entirety and Article 5
thereof is amended and restated to read in its entirety as follows:

5. The aggregate number of shares which the corporation shall have
authority to issue is: Forty Million (40,000,000) shares of Class A
Common Stock, $5.00 par value per share ("Class A Common Stock") and
Two Million (2,000,000) shares of Preferred Stock $.01 par value per
share ("Preferred Stock").

A. Class A Common Stock

Except as otherwise required by the Pennsylvania Business
Corporation Law or as otherwise provided in these Articles of
Incorporation, with respect to all matters upon which shareholders
are entitled to vote or to which shareholders are entitled to give
consent, every holder of any outstanding shares of the Class A
Common Stock shall be entitled to cast thereon one (1) vote in
person or by proxy for each share of the Class A Common Stock
standing in his name. In all elections for directors, holders of
Class A Common Stock shall not be entitled to cumulate their
votes.

B. Conversion of the Common Stock.

Each share of Common Stock, $5.00 par value per share ("Common
Stock"), shall automatically, and without any action by the holder
thereof, effective as of 5 p.m. (Eastern Time) on the date of the
filing of these Articles of Amendment with the Pennsylvania
Department of State ("Effective Time"), be converted into one
fully paid and nonassessable share of Class A Common Stock. The
issuance of a certificate or certificates for shares of Class A
Common Stock, if requested by the holder thereof by reason of the
foregoing conversion of shares of Common Stock, shall be made
without charge. As of the Effective Time, the holder of any shares
of Common Stock shall be treated for all purposes as having become
the holder of the identical number of shares of Class A Common
Stock at such time and shall have and may exercise all the rights
and powers appertaining thereto. No adjustments in respect of past
cash dividends shall be made by reason of the foregoing conversion
of shares of Common Stock; provided, however, that if any shares
of Common Stock shall be converted subsequent to the record date
for the payment of a cash or stock dividend or other distribution
on shares of Common Stock but prior to such payment, the
registered holder of such shares at the close of business on such
record date shall be entitled to receive the cash or stock
dividend or the distribution payable to holders of the Common
Stock.

C. Preferred Stock

(1) The Preferred Stock may be issued from time to time in
one or more series by action of the Board of Directors of the
Corporation. The Board of Directors of the Corporation shall have
the full authority permitted by the Pennsylvania Business
Corporation Law to establish by resolution one or more series, to
determine the designation and the number of shares constituting
each such series and to determine the voting rights, preferences,
limitations, conversion rights and special or relative rights of
any series of the Preferred Stock that may be desired. Except as
otherwise provided in the terms of any series of the Preferred
Stock

A-1
<PAGE>

and subject to the limitation on the total number of shares of
Preferred Stock that the Corporation has authority to issue
hereunder, the Board of Directors of the Corporation is also
authorized to increase or decrease the number of shares of any
series, subsequent to the issue of that series, but not below the
number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status that they had
prior to the adoption of the resolutions originally fixing the
number of shares of such series. Without limiting the generality
of the foregoing, the Board of Directors of the Corporation shall
have full authority with respect to:

(a) the designation of the series and the number of
shares to constitute each series;

(b) the dividend rate on the shares of each series, any
conditions on which and times at which dividends are payable,
whether dividends shall be cumulative, and the preference or
relation (if any) with respect to such dividends (including
possible preferences over dividends on the Class A Common
Stock or any other class or classes or series of stock);

(c) whether the series will be redeemable (at the option
of the Corporation or the holders of such shares or both, or
upon the happening of a specified event) and, if so, the
redemption prices and the conditions and times upon which
redemption may take place and whether for cash, property or
rights, including securities of the Corporation or another
corporation;

(d) the terms and amount of any sinking, retirement
or purchase fund;

(e) the conversion or exchange rights (at the option of
the Corporation or the holders of such shares or both, or upon
the happening of a specified event), if any, including the
conversion or exchange price and other terms of conversion or
exchange;

(f) the voting rights, if any (other than any voting
rights that the Preferred Stock may have as a matter of
law);

(g) any restrictions on the issue or reissue or sale
of additional Preferred Stock;

(h) the rights of the holders upon voluntary or
involuntary liquidation of the Corporation (including
preferences, if any, over the Class A Common Stock or any
other class or classes or series of stock);

(i) the preemptive rights, if any, to subscribe to
additional issues of stock or securities of the
Corporation; and

(j) such other special rights and privileges, if any, for
the benefit of the holders of the Preferred Stock, as shall
not be inconsistent with provisions of these Articles of
Incorporation.

(2) All shares of Preferred Stock of the same series shall be
identical in all respects, except that shares of any one series
issued at different times may differ as to dates, if any, from
which dividends thereon may accumulate. All shares of Preferred
Stock of each series shall be of equal rank and shall be identical
in all respects except that any series may differ from any other
series with respect to any one or more of the designations,
relative rights, preferences and limitations described or referred
to in subparagraph 5.C.(1) hereof.

A-2
<PAGE>
ANNEX B

AMENDED AND RESTATED ARTICLES OF INCORPORATION
----------------------------------------------

5. The aggregate number of shares which the Corporation shall have the
authority to issue is: Forty Million (40,000,000) shares of Common Stock, $5.00
par value per share (the "Common Stock"), and Forty Million (40,000,000) shares
of Class A Common Stock, $5.00 par value per share (the "Class A Common Stock").

A. Voting Rights and Powers. Except as otherwise required by the
Pennsylvania Business Corporation Law or as otherwise provided in these
Articles of Incorporation or the By-laws of the Corporation, with
respect to all matters upon which shareholders are entitled to vote or
to which shareholders are entitled to give consent, the holders of the
outstanding shares of the Common Stock and the holders of any
outstanding shares of the Class A Common Stock shall vote together
without regard to class, and every holder of the outstanding shares of
the Common Stock shall be entitled to cast thereon ten (10) votes in
person or by proxy for each share of the Common Stock standing in his
name, and every holder of any outstanding shares of the Class A Common
Stock shall be entitled to cast thereon one (1) vote in person or by
proxy for each share of the Class A Common Stock standing in his name.
In all elections for directors, each shareholder is entitled to
cumulate his votes. With respect to any proposed amendments to these
Articles of Incorporation which would increase or decrease the number
of authorized shares of either the Common Stock or the Class A Common
Stock, increase or decrease the par value of the shares of the Common
Stock or the Class A Common Stock, or alter or change the powers,
preferences, relative voting power or special rights of the shares of
the Common Stock or the Class A Common Stock so as to affect it
adversely, the approval of a majority of the votes entitled to be cast
by the holders of the class affected by the proposed amendment, voting
separately as a class, shall be obtained in addition to the approval of
a majority of the votes entitled to be cast by the holders of the
Common Stock and the Class A Common Stock voting together without
regard to class as hereinbefore provided.

B. Dividends and Distributions.

(a) Cash Dividends. At any time shares of the Class A Common
Stock are outstanding, as and when cash dividends may be declared by
the Board of Directors, the cash dividend payable on shares of the
Class A Common Stock shall in all cases be at least ten percent (10%)
higher on a per share basis than the cash dividend payable on shares of
the Common Stock.

(b) Other Dividends and Distributions. Each share of the Common
Stock and each share of the Class A Common Stock shall be equal in
respect of rights to dividends (other than cash) and distributions,
when and as declared, in the form of stock or other property of the
Corporation, except that in the case of dividends or other
distributions payable in stock of the Corporation, including
distributions pursuant to stock split-ups or divisions, which occur
after the date shares of the Class A Common Stock are first issued by
the Corporation, only shares of the Common Stock shall be distributed
with respect to the Common Stock and only shares of Class A Common
Stock shall be distributed with respect to Class A Common Stock.

C. Other Rights. Except as otherwise required by the Pennsylvania
Business Corporation Law or as otherwise provided in these Articles of
Incorporation, each share of the Common Stock and each share of the Class
A Common Stock shall have identical powers, preferences and rights,
including rights in liquidation.

D. Conversion of the Common Stock. Each share of Common Stock may at
any time be converted at the election of the holder thereof into one
fully paid and nonassessable share of Class A Common Stock. Any holder of
shares of Common Stock may elect to convert any or all of such shares at
one time or at various times in such holder's discretion. Such right
shall be exercised by the surrender of the certificate representing each
share of Common Stock to be converted to the agent for the registration
for transfer of shares of Common Stock at its office, or to the
Corporation

B-1
<PAGE>

at its principal executive offices, accompanied by a written notice of
the election by the holder thereof to convert and (if so required by the
transfer agent or by the Corporation) by instruments of transfer, in form
satisfactory to the transfer agent and to the Corporation, duly executed
by such holder or his duly authorized attorney. The issuance of a
certificate or certificates for shares of Class A Common Stock upon
conversion of shares of Common Stock shall be made without charge for any
stamp or other similar tax in respect of such issuance. However, if any
such certificate or certificates is or are to be issued in a name other
than that of the holder of the share or shares of Common Stock converted,
the person or persons requesting the issuance thereof shall pay to the
transfer agent or to the Corporation the amount of any tax which may be
payable in respect of any such transfer, or shall establish to the
satisfaction of the transfer agent or of the Corporation that such tax
has been paid. As promptly as practicable after the surrender for
conversion of a certificate or certificates representing shares of Common
Stock and the payment of any tax as hereinbefore provided, the
Corporation will deliver or cause to be delivered at the office of the
transfer agent to, or upon the written order of, the holder of such
certificate or certificates, a certificate or certificates representing
the number of shares of Class A Common Stock issuable upon such
conversion, issued in such name or names as such holder may direct. Such
conversion shall be irrevocable and shall be deemed to have been made
immediately prior to the close of business on the date of the surrender
of the certificate or certificates representing shares of Common Stock
(if on such date the transfer books of the Corporation shall be closed,
then immediately prior to the close of business on the first date
thereafter that said books shall be open), and all rights of such holder
arising from ownership of such shares of Common Stock shall cease at such
time, and the person or persons in whose name or names the certificate or
certificates representing shares of Class A Common Stock are to be issued
shall be treated for all purposes as having become the record holder or
holders of such shares of Class A Common Stock at such time and shall
have and may exercise all the rights and powers appertaining thereto. No
adjustments in respect of past cash dividends shall be made upon the
conversion of any share of Common Stock; provided, however, that if any
shares of Common Stock shall be converted subsequent to the record date
for the payment of a cash or stock dividend or other distribution on
shares of Common Stock but prior to such payment, the registered holder
of such shares at the close of business on such record date shall be
entitled to receive the cash or stock dividend or the distribution
payable to holders of the Common Stock. The Corporation shall at all
times reserve and keep available, solely for the purpose of issue upon
conversion of outstanding shares of Common Stock, such number of shares
of Class A Common Stock as may be issuable upon the conversion of all
such outstanding shares of Common Stock, provided, the Corporation may
deliver shares of Class A Common Stock which are held in the treasury of
the Corporation for shares of Common Stock to be converted. If any shares
of Class A Common Stock require registration with or approval of any
governmental authority under any federal or state law before such shares
of Class A Common Stock may be issued upon conversion, the Corporation
will cause such shares to be duly registered or approved, as the case may
be. All shares of Class A Common Stock which may be issued upon
conversion of shares of Common Stock will, upon issue, be fully paid and
nonassessable.

6. Except with respect to shares, rights, options and other securities of
the Corporation that are issued or granted in connection with any stock purchase
plan, stock option plan or other similar benefit plan that has been approved by
the holders of a majority of the Corporation's outstanding Common Stock, the
holders of Common Stock of the Corporation shall be entitled, as such, as a
matter of right, to subscribe for and to purchase any part of any new or
additional issue of Common Stock, any rights or options to purchase Common
Stock, or any securities convertible into, exchangeable for or carrying rights
or options to purchase Common Stock, whether now or hereafter authorized, but
only in those instances in which such shares of Common Stock, rights or options
to purchase Common Stock are issued for a consideration consisting solely of
money. In the event of the issuance of such shares or other securities solely
for money, the preemptive right herein granted shall only be an opportunity to
acquire such shares or other securities under such terms and conditions as the
Board of Directors shall fix. The preemptive right herein granted shall not
apply in any respect to the Corporation's Class A Common Stock, and holders of
such Class A Common Stock, as such, shall have no preemptive rights.

B-2
<PAGE>
ANNEX C

PMA Capital Corporation Annual Incentive Plan
---------------------------------------------

ARTICLE 1

Statement of Purpose

PMA Capital Corporation's compensation policies are intended to support the
Company's overall objective of enhancing shareholder value. In furtherance of
this philosophy, the PMA Capital Corporation Annual Incentive Plan is intended
to motivate and reward executive officers of the Company by providing for annual
incentive bonuses if annual pre-established performance goals are achieved. The
Plan is also intended to qualify as a performance-based compensation plan under
Section 162(m) of the Internal Revenue Code.

ARTICLE 2

Definitions

The terms used in this Plan include the feminine as well as the masculine
gender and the plural as well as the singular, as the context in which they are
used requires. The following terms, unless the context requires otherwise, are
defined as follows:

2.1 "Award" means the incentive compensation determined by the Committee
under Section 4.4 of the Plan payable in cash.

2.2 "Board" means the PMA Capital Corporation Board of Directors.

2.3 "Code" means the Internal Revenue Code of 1986, as amended.

2.4 "Committee" means the Compensation Committee of the Board or any
successor committee with responsibility for compensation, or any
subcommittee, as long as the number of Committee members and their
qualifications shall at all times be sufficient to meet the
requirements for "outside directors" under Section 162(m) and the
regulations thereunder, as in effect from time to time.

2.5 "Company" means PMA Capital and/or its Subsidiaries.

2.6 "Deferred Compensation Plan" means the PMA Capital Corporation
Executive Deferred Compensation Plan, a similar or successor plan, or
other arrangement for the deferral of compensation specified by the
Committee.

2.7 "Disability" means permanent and total disability as defined in Code
Section 22(e)(3).

2.8 "Executive Officer" means any Company employee who is an "executive
officer" as defined in Rule 3b-7 promulgated under the Exchange Act.

2.9 "Exchange Act" means the Securities Exchange Act of 1934.

2.10 "Participant" means an Executive Officer as described in Article 3 of
the Plan.

C-1
<PAGE>

2.11 "Performance Period" means the period for which an Award may be made.
Unless otherwise specified by the Committee, the Performance Period
shall be a calendar year.

2.12 "Plan" means the PMA Capital Corporation Annual Incentive Plan, as it
may be amended from time to time.

2.13 "PMA Capital" means PMA Capital Corporation, a Pennsylvania
corporation, or any successor.

2.14 "Retirement" means a Termination of Employment, after appropriate
notice to the Company, (a) on or after the earliest permissible
retirement date under a qualified pension or retirement plan of the
Company, or (b) upon such terms and conditions approved by the
Committee, or officers of the Company designated by the Board or the
Committee.

2.15 "SEC" means the Securities and Exchange Commission.

2.16 "Section 162(m)" means Code Section 162(m) and regulations promulgated
thereunder by the Secretary of the Treasury.

2.17 "Subsidiary" means any corporation of which more than 50% of the total
combined voting power of all classes of stock entitled to vote, or
other equity interest, is directly or indirectly owned by PMA Capital,
or a partnership, joint venture or other unincorporated entity of
which more than a 50% interest in the capital equity or profits is
directly or indirectly owned by PMA Capital.

2.18 "Termination of Employment" means (a) the termination of the
Participant's active employment relationship with the Company, unless
otherwise expressly provided by the Committee, or (b) the occurrence
of a transaction by which the Participant's employing Company ceases
to be a Subsidiary.

ARTICLE 3

Participation

Any Executive Officer designated by the Committee shall be a Participant in
the Plan and shall continue to be a Participant until any Award he may receive
has been paid or forfeited under the terms of the Plan.

ARTICLE 4

Incentive Awards

4.1 Objective Performance Goals. The Committee shall establish written,
objective performance goals for a Performance Period not later than 90 days
after the beginning of the Performance Period (but not after more than 25% of
the Performance Period has elapsed), or by some other date required or permitted
under Section 162(m). The objective performance goals shall be stated as
specific amounts of, or specific changes in, one or more of the financial
measures described in Section 4.2. The objective performance goals need not be
the same for different Performance Periods and for any Performance Period may be
stated: (a) as goals for PMA Capital, for one or more of its subsidiaries,
divisions, business units, lines of business, or for any combination of the
foregoing; (b) on an absolute basis or relative to the performance of other
companies or of a specified index or indices, or be based on any combination of
the

C-2
<PAGE>

foregoing; and (c) separately for one or more of the Participants, collectively
for the entire group of Participants, or in any combination of the two.

4.2 Financial Measures. The Committee shall use any one or more of the
following financial measures to establish objective performance goals under
Section 4.1: premiums, revenues, earnings, including operating earnings,
earnings per share, including operating earnings per share, shareholders'
equity, return on equity, assets, return on assets, capital, return on capital,
book value, economic value added, operating margins, cash flow, shareholder
return, expenses, expense ratios, loss ratios, underwriting results,
debt-to-capital ratio or market share. The Committee may specify any reasonable
definition of the financial measures it uses. Such definitions may provide for
reasonable adjustments and may include or exclude items, including but not
limited to: realized investment gains and losses; extraordinary, unusual or
non-recurring items; effects of accounting changes, currency fluctuations,
acquisitions, divestitures, reserve strengthening or necessary financing
activities; recapitalizations, including stock splits and dividends; expenses
for restructuring or productivity initiatives; and other non-operating items.

4.3 Performance Evaluation. Within a reasonable time after the close of a
Performance Period, the Committee shall determine whether the objective
performance goals established for that Performance Period have been met. If the
objective performance goals and any other material terms established by the
Committee have been met, the Committee shall so certify in writing.

4.4 Award. If the Committee has made the written certification under
Section 4.3 for a Performance Period each Participant to whom the certification
applies shall be eligible for an Award for that Performance Period. The Award
for each such Participant shall equal no more than 200% of the Participant's
base salary in effect on January 1 of the applicable Performance Period. For any
Performance Period, however, the Committee shall have sole and absolute
discretion to reduce the amount of or eliminate entirely, the Award to one or
more of the Participants based upon the Committee's review of the objective
performance goals for each Participant pursuant to Section 4.3. However, the
exercise of negative discretion shall not be permitted to result in an increase
in the amount payable to another Participant.

4.5 Payment of the Award.

(a) When the Committee makes its determination under Section 4.4, it shall
also determine in its sole discretion whether a payment of an Award
shall be made immediately or deferred until a later date or the
occurrence of a particular event.

(b) If the Committee determines that payment of an Award is to be made
immediately, then as soon as practicable after the Committee's
determination under Section 4.4, but subject to Section 4.6(a), the
Company shall pay the Award to the Participant.

(c) If the Committee defers payment of an Award, then, on the date or
after the event specified by the Committee, the Company shall make the
payment, together with any interest or investment return as may be
specified by the Committee in its deferral determination. Such
additional amount shall be based either on a reasonable rate of
interest or one or more predetermined actual investments (whether or
not assets associated with the amount originally owed are actually
invested therein) such that the amount payable by the Company at the
later date will be based on the actual rate of return of a specific
investment (including any decrease as well as any increase in the
value of the investment). Awards deferred by the Committee will not be
funded but will be general obligations of PMA Capital and will be
payable out of that Company's general assets.

C-3
<PAGE>

(d) The Participant may elect to defer receipt of an Award in the form of
cash under the terms of the Deferred Compensation Plan. Such election
shall be irrevocable and shall be made on or before December 31 of the
calendar year prior to the calendar year in which the determination of
the Award is made. Any interest rate or investment return credited on
a voluntarily deferred Award shall be one that will produce a rate of
return not considered to be an impermissible increase in compensation
under Section 162(m) in the manner set forth in Section 4.5(c).

(e) The Company shall have the right to deduct from any Award, any
applicable Federal, state and local income and employment taxes, and
any other amounts that the Company is required to deduct.

4.6 Eligibility for Payments.

(a) Except as otherwise provided in this Section 4.6:

(1) A Participant shall be eligible to receive an Award for a
Performance Period only if the Participant is employed by the
Company continuously from the beginning of the Performance Period
to the date of the Committee's determination under Section 4.4;
and

(2) A Participant shall be eligible to receive payment of an Award
deferred by the Committee only if the Participant is also
employed by the Company continuously from the date of the
Committee's determination under Section 4.4 to the date or event
specified by the Committee.

(b) Under Section 4.6(a), a leave of absence that lasts less than three
months and that is approved in accordance with applicable Company
policies is not a break in continuous employment. In the case of a
leave of absence of three months or longer: (1) the Committee shall
determine whether the leave of absence constitutes a break in
continuous employment, and (2) if a Participant is on a leave of
absence on the date that an Award or payment of the Award is to be
made, the Committee may require that the Participant return to active
employment with the Company at the end of the leave of absence as a
condition of receiving the Award or payment. Any determination as to a
Participant's eligibility for an Award or payment under this Section
4.6(b) may be deferred for a reasonable period after such return.

(c) If a Participant's Termination of Employment occurs after the end of a
Performance Period but before the Committee makes an Award under
Section 4.4, and the Termination of Employment is on account of
Retirement, death or Disability, the Committee shall determine whether
to make an Award to or on behalf of the Participant.

(d) If a Participant's Termination of Employment on account of Retirement,
death or Disability occurs after the Committee makes a deferred Award
under Section 4.5(a) but before the Award payment is made:

(1) The Award payment shall be made as if the Participant had
remained continuously employed until the date of payment if the
Termination of Employment is on account of Disability;

(2) The Award payment shall be made as soon as practicable (and the
payee shall be determined under the provisions of the Deferred
Compensation Plan applicable to

C-4
<PAGE>
distributions upon the death of a participant), if the
Termination of Employment is on account of death; and

(3) The Committee shall determine whether an Award payment shall be
made to the Participant or forfeited if the Termination of
Employment is on account of Retirement.

ARTICLE 5

Administration

5.1 General Administration. The Plan shall be administered by the
Committee, subject to such requirements for review and approval by the Board as
the Board may establish. Subject to the terms and conditions of the Plan and
Section 162(m), the Committee is authorized and empowered in its sole discretion
to select Participants and to make Awards in such amounts and upon such terms
and conditions as it shall determine.

5.2 Administrative Rules. The Committee shall have full power and authority
to adopt, amend and rescind administrative guidelines, rules and regulations
pertaining to this Plan and to interpret the Plan and rule on any questions
respecting any of its provisions, terms and conditions.

5.3 Committee Members Not Eligible. No member of the Committee shall be
eligible to participate in this Plan.

5.4 Committee Members Not Liable. The Committee shall be entitled to rely
upon certificates of appropriate officers of the Company with respect to
financial and statistical data in order to determine if the objective
performance goals have been met. The Committee shall not be liable for any
action or determination made in good faith with respect to this Plan.

5.5 Decisions Binding. All decisions of the Committee concerning this Plan
shall be binding on PMA Capital and its Subsidiaries and their respective boards
of directors, and on all Participants and other persons claiming rights under
the Plan.

5.6 Section 162(m); Shareholder Approval. Awards under this Plan are
intended to satisfy the applicable requirements for the performance-based
compensation exception under Section 162(m). It is intended that the Plan be
administered, interpreted and construed so that Award payments remain tax
deductible to the Company. Any Awards under this Plan shall be contingent upon
shareholder approval of the Plan in accordance with Section 162(m), the
regulations thereunder and other applicable U.S. Treasury regulations. Unless
and until such shareholder approval is obtained, no Award shall be made under
this Plan.

ARTICLE 6

Amendments; Termination

The Plan may be amended or terminated by the Board or Committee. All
amendments to this Plan including an amendment to terminate the Plan, shall be
in writing. An amendment shall not be effective without the prior approval of
the shareholders of PMA Capital Corporation if such approval is necessary to
continue to qualify Awards as performance-based compensation under Section
162(m), or otherwise under Treasury or SEC regulations, the rules of The Nasdaq
Stock Market or any other applicable exchange or any other applicable law or
regulations. Unless otherwise expressly provided by the Board or Committee, no
amendment to this Plan shall apply to Awards made before the effective date of
the

C-5
<PAGE>

amendment. A Participant's rights with respect to any Awards made to him may
not be abridged by any amendment, modification or termination of the Plan,
without his individual consent.

ARTICLE 7

Other Provisions

7.1 Duration of the Plan. This Plan is effective as of January 1, 2000 (the
"Effective Date"), subject to approval by PMA Capital's shareholders. The Plan
shall remain in effect until all Awards made under this Plan have been paid or
forfeited under the terms of this Plan, and all Performance Periods related to
Awards made under the Plan have expired. No Awards may be made under the Plan
for any Performance Period that would end after December 31, 2004, unless the
Board, subject to any shareholder approval that may then be required to continue
to qualify the Plan as a performance-based plan under Section 162(m), extends
the Plan.

7.2 Awards Not Assignable. No Award or any right thereto, shall be
assignable or transferable by a Participant except by will or by the laws of
descent and distribution. Any other attempted assignment or alienation shall be
void and of no force or effect.

7.3 Participant's Rights. The right of any Participant to receive any Award
payments under the provisions of the Plan shall be an unsecured claim against
the general assets of the Company. The Plan shall not create, nor be construed
in any manner as having created, any right by a Participant to any Award for a
Performance Period because of a Participant's participation in the Plan for any
prior Performance Period, or because the Committee has made a written
certification under Section 4.3 for the Performance Period.

7.4 Termination of Employment. The Company retains the right to terminate
the employment of any employee at any time for any reason or no reason, and an
Award is not, and shall not be construed in any manner to be, a waiver of such
right.

7.5 Exclusion From Benefits. Awards under this Plan shall not constitute
compensation for the purpose of determining participation or benefits under any
other plan of the Company unless specifically included as compensation in such
plan.

7.6 Successors. Any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of PMA Capital's
business or assets, shall assume PMA Capital's liabilities under this Plan and
perform any duties and responsibilities in the same manner and to the same
extent that PMA Capital would be required to perform if no such succession had
taken place.

7.7 Law Governing Construction. The construction and administration of
the Plan and all questions pertaining thereto shall be governed by applicable
federal law and otherwise by the laws of the Commonwealth of Pennsylvania.

7.8 Headings Not a Part Hereof. Any headings preceding the text of the
several Articles, Sections, subsections, or paragraphs hereof are inserted
solely for convenience of reference and shall not constitute a part of the Plan,
nor shall they affect its meaning, construction, or effect.

7.9 Severability of Provisions. If any provision of this Plan is determined
to be void by any court of competent jurisdiction, the Plan shall continue to
operate and, for the purposes of the jurisdiction of that court only, shall be
deemed not to include the provision determined to be void.

C-6
<PAGE>

PMA CAPITAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 24, 2000
THIS PROXY/VOTING INSTRUCTION IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Charles A. Brawley, III, Albert
D. Ciavardelli and Francis W. McDonnell, each or any of them, proxies of the
undersigned, with full power of substitution, and each of them is hereby
authorized to represent the undersigned and to vote all of the shares of Common
Stock and Class A Common Stock of PMA Capital Corporation (the "Company") that
the undersigned may be entitled to vote at the Annual Meeting of
shareholders of the Company to be held at 380 Sentry Parkway, Blue Bell,
Pennsylvania on Monday, April 24, 2000, at 9 a.m., local time, and at any
adjournment thereof.

This proxy/voting instruction when properly executed, will be voted in the
manner directed herein by the undersigned shareholder. If no direction is made
by a record holder, this proxy will be voted FOR the nominees for director set
forth in item 1 and FOR the proposal in items 2, 3, 4, 5 and 6. This proxy also
covers all shares as to which the undersigned has the right to give voting
instructions to the Trustee under the Company's 401(K) Plan. If no voting
instruction is given to the Trustee, the Trustee will vote your shares on a pro
rata basis based on the votes of other 401(k) Plan participants.

PMA CAPITAL CORPORATION
P.O. BOX 11258
NEW YORK, N.Y. 10203-0258

(Continued, and to be marked, dated and signed on other side)

The Board of Directors recommends a vote FOR items 1, 2, 3, 4, 5 and 6.

Item 1. Election Of Directors (INSTRUCTIONS: A shareholder may use cumulative
voting for the nominees by voting the number of shares held times the number of
directors being elected on a single or group of candidates. To withhold
authority to vote for any individual nominee mark the "Exceptions*" box and
strike a line through the nominee's name.)

[ ] FOR all nominees listed [ ] WITHHOLD authority [ ] FOR all nominees
below equally among to vote for all listed below
nominees or voted as nominees listed except.*
set forth below below.

Nominees:
Frederick W. Anton III ______ shares James F. Malone III ______ shares
Joseph H. Foster ______ shares L. J. Rowell, Jr. ______ shares

Item 2. Approval of Reclassification Amendment to the Amended and Restated
Articles of Incorporation