SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 3, 2000
-----------
PMA Capital Corporation
-----------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 000-22761 23-2217932
------------ --------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1735 Market Street, Suite 2800
Philadelphia, Pennsylvania 19103-7590
-------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 665-5046
--------------
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
------------
A. On May 3, 2000, the Company issued a news release, a copy of which is
filed as Exhibit 99.1 hereto and is incorporated herein by reference.
B. On May 3, 2000, the Board of Directors of the Company approved the
adoption of a shareholder rights plan and declared a dividend of one
preferred share purchase right for each outstanding share of Class A Common
Stock of the Company. The dividend is payable to the shareholders of record
as of 5:00 p.m. (eastern time), on May 22, 2000. The plan was not adopted
in response to any takeover attempt. A news release announcing the
shareholder rights plan is filed as Exhibit 99.2 hereto and is incorporated
herein by reference.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) The exhibits accompanying this report are listed in the Index to
Exhibits on the following page.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PMA Capital Corporation
Date: May 4, 2000 By: /s/Francis W. McDonnell
------------------------------------
Francis W. McDonnell
Senior Vice President, Chief Financial
Officer and Treasurer
2
<PAGE>
Index to Exhibits
Number Description Method of Filing
------ ----------- ----------------
99.1 PMA Capital Corporation Filed herewith
news release dated
May 3, 2000
99.2 PMA Capital Corporation Filed herewith
news release dated
May 3, 2000
3
[LOGO] PMA CAPITAL
A Specialty Risk Management Company
Mellon Bank Center Suite 2800
1735 Market Street
Philadelphia, PA 19103-7590 PRESS RELEASE
================================================================================
For Release: Immediate
Contact: Albert D. Ciavardelli
(215) 665-5063
PMA Capital Announces First Quarter 2000 Results
------------------------------------------------
Operating Earnings Per Share Continues to Improve
-------------------------------------------------
Philadelphia, PA, May 3, 2000 -- PMA Capital (NASDAQ: PMACA) today announced
that first quarter 2000 after-tax operating income (net income excluding
after-tax net realized investment gains and losses and the cumulative effect of
accounting changes) was $7.9 million, or $0.35 per diluted share, compared with
$7.9 million, or $0.33 per diluted share, for the first quarter of 1999.
Operating income in the first quarter of 2000 reflected stable underwriting
performance and a 4% increase in investment income. On a per share basis,
operating income improved 6% as a result of the favorable effect of share
repurchase activities in 1999 and 2000.
"We have prepared a sound and reasonable business plan for 2000, which includes
sound underwriting and quality service as two of the more important keys to our
continued success. In the first quarter of 2000, we continued to build on our
record of performance. The improvement in operating earnings per share, an
important performance target for PMA Capital, reflected stable underwriting
results and the successful execution of our share repurchase program," commented
John W. Smithson, President and Chief Executive Officer of PMA Capital.
Net Income
- ----------
Net income for the first quarter of 2000 was $4.4 million, or $0.19 per diluted
share, compared with $5.7 million, or $0.24 per diluted share, for the
comparable period of 1999.
Included in net income for the first quarter of 2000 were after-tax net realized
investment losses of $3.5 million, compared with gains of $570,000 for the same
period last year. Net realized investment losses in 2000 principally resulted
from sales of investments in the first quarter in order to capitalize on higher
yielding investment opportunities.
Net income for the first quarter of 1999 was impacted by an after-tax charge of
$2.8 million for the implementation of the new accounting rule for
insurance-related assessments.
<PAGE>
PMA Re
- ------
PMA Re reported pre-tax operating income of $14.0 million for the first quarter
of 2000, compared with $12.7 million for the same period last year. The 9.7%
increase in pre-tax operating income for the first quarter of 2000 primarily
reflects a 9.0% increase in investment income.
Net premiums written were $67.0 million in the first quarter of 2000, compared
with $78.3 million for the same period last year. Absent a revision in 1999 to
PMA Re's estimation of unreported premiums on in-force contracts, net premiums
written for the first quarter of 2000 would have been essentially flat with the
first quarter of 1999. Expanded participations and price increases led to growth
in premiums for PMA Re's Traditional and Finite Risk and Financial Products
units. However, this growth was substantially offset by lower premiums from the
Specialty unit reflecting the effects of the highly competitive conditions in
the professional liability reinsurance market.
The combined ratio, as computed using generally accepted accounting principles
(GAAP), was 101.3% for the first quarter of 2000, compared with 101.7% for the
same period last year.
Net investment income was $14.9 million for the first quarter of 2000, compared
with $13.6 million for the same period last year. The 9.0% increase for the
quarter reflects a higher average invested asset base and higher yields on the
invested assets, resulting from a shift in invested assets toward higher
yielding securities.
The PMA Insurance Group
- -----------------------
The PMA Insurance Group reported pre-tax operating income of $5.6 million for
the first quarter of 2000, compared with $5.0 million for the same period last
year. The 12.4% improvement primarily reflects improved loss experience,
partially offset by lower investment income.
For the first quarter of 2000, direct workers' compensation premiums written by
The PMA Insurance Group increased 2.0% to $72.7 million, compared with $71.3
million for 1999. This increase principally reflects the successful execution of
focused marketing efforts, including efforts to shift the workers' compensation
book to relatively lower hazard classes of business, partially offset by a
higher level of retrospective premium adjustments.
Net premiums written were $87.4 million for the first quarter of 2000, compared
with $83.0 million for the same period last year. The 5.3% improvement in net
premiums written primarily reflects a $3.9 million increase in premiums for PMA
One, which is The PMA Insurance Group's integrated disability product.
The GAAP combined ratio, excluding Run-off Operations, was 111.6% for the first
quarter of 2000, compared with 114.3% for the comparable period last year.
Net investment income, excluding Run-off Operations, decreased by $860,000, or
7.2%, for the first quarter of 2000, compared with the same period last year,
due largely to a lower invested asset base.
The PMA Insurance Group's Run-off operations, which reinsure certain obligations
primarily associated with workers' compensation claims for the years 1991 and
prior, had pre-tax operating income of $219,000 and $66,000 for the first
quarter of 2000 and 1999, respectively.
2
<PAGE>
Caliber One
- -----------
Caliber One reported a pre-tax operating loss of $2.3 million for the first
quarter of 2000, compared with a loss of $696,000 for the same period last year.
The decline in operating results primarily reflects an underwriting loss on
professional liability and commercial automobile lines, partially offset by
higher investment income.
Caliber One's net premiums written were $9.6 million for the first quarter of
2000, compared with $7.3 million for the first quarter of 1999. Caliber One's
GAAP combined ratio for the first quarter of 2000 was 162.6%, compared with
141.5% for the same period last year. The combined ratio for the first quarter
of 2000 reflects the effects of an underwriting loss on the professional
liability and commercial automobile lines.
Corporate and Other
- -------------------
The Corporate and Other segment includes unallocated investment income and
expenses, including debt service, as well as the results of certain of the
Company's real estate properties. For the first quarters of 2000 and 1999,
pre-tax operating losses for this segment were $5.1 million and $4.8 million,
respectively.
Financial Position
- ------------------
Total assets were $3.3 billion as of March 31, 2000, compared with $3.2 billion
as of December 31, 1999. Shareholders' equity was $438.6 million as of March 31,
2000, compared with $429.1 million as of December 31, 1999. The increase in
shareholders' equity primarily reflects an $11.7 million improvement in
after-tax unrealized losses on invested assets primarily resulting from a
decrease in interest rates since year-end 1999, which has increased the fair
value of fixed maturity investments.
Book value per share, excluding unrealized gains and losses on fixed maturities,
was $21.42 as of March 31, 2000, compared with $21.22 as of December 31, 1999
and $20.68 as of March 31, 1999.
Share Repurchase Plan
- ---------------------
During the first quarter of 2000, PMA Capital repurchased 318,000 shares of its
Class A Common Stock at a cost of $6.0 million (average per share price was
$18.97).
Since the inception of its share repurchase program in February 1998, PMA
Capital has repurchased a total of 2.8 million shares at a total cost of $55.1
million (average per share price was $19.39).
As of May 3, 2000, the remaining share repurchase authorization was $19.9
million.
Quarterly Dividends
- -------------------
On May 3, 2000, PMA Capital's Board of Directors declared regular quarterly
dividends on its Class A Common Stock of $0.09 per share to shareholders of
record on June 14, 2000. The dividends will be paid on July 5, 2000. PMA Capital
has paid consecutive quarterly dividends to its shareholders for the past 84
years.
PMA Capital Corporation, headquartered in Philadelphia, Pennsylvania, is an
insurance holding company, whose operating subsidiaries provide specialty risk
management products and services to customers throughout the United States. The
primary product lines of PMA Capital's subsidiaries
3
<PAGE>
include: 1) property and casualty reinsurance, underwritten and marketed through
PMA Re; 2) managed care workers' compensation, integrated disability and other
commercial property and casualty lines of insurance in the Mid-Atlantic and
Southern regions of the United States, underwritten and marketed under the trade
name The PMA Insurance Group; and 3) excess and surplus lines coverages,
underwritten and marketed by Caliber One.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this release and oral statements made by individuals
authorized to speak on behalf of PMA Capital Corporation (the "Company") that
are not historical facts are forward-looking statements and are based on
estimates, assumptions and projections. Actual results may differ materially
from those projected in the forward-looking statements. These forward-looking
statements are based on currently available financial, competitive and economic
data and the Company's current operating plans based on assumptions regarding
future events. The Company's actual results could differ materially from those
expected by the Company's management. The factors that could cause actual
results to vary materially, some of which are described with the forward-looking
statements, include, but are not limited to, changes in general economic
conditions, including the performance of financial markets and interest rates;
regulatory or tax changes, including changes in risk-based capital or other
regulatory standards that affect the ability of the Company to conduct its
business; competitive or regulatory changes that affect the cost of or demand
for the Company's products; the Company's ability to meet its marketing
objectives; the effect of changes in workers' compensation statutes and their
administration; the Company's ability to predict and effectively manage claims
related to insurance and reinsurance policies; reliance on key management;
adequacy of reserves for claim liabilities; adverse property and casualty loss
development for events the Company insured in prior years; adequacy and
collectibility of reinsurance purchased by the Company; severity of natural
disasters and other catastrophes; the effect of claims related to Year 2000
systems problems ("Y2K Problems") asserted against the Company by insureds in
which coverage is found to exist by courts in various jurisdictions, and the
costs of any litigation with respect to Y2K Problems regardless of whether
coverage is found; and other factors disclosed from time to time in reports
filed by the Company with the Securities and Exchange Commission. Investors
should not place undue reliance on any such forward-looking statements. The
Company disclaims any obligation to update forward-looking information
4
<PAGE>
PMA Capital Corporation
Financial Data
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Three months ended March 31,
Income Statement Data: 2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net premiums written:
PMA Re $ 66,992 $ 78,327
The PMA Insurance Group 87,446 83,021
Caliber One 9,590 7,322
Corporate and Other (94) (153)
---------------------------------------
Consolidated $ 163,934 $ 168,517
=======================================
Revenues:
Net premiums earned:
PMA Re $ 63,137 $ 52,433
The PMA Insurance Group 57,092 54,399
Caliber One 5,687 2,643
Corporate and Other (94) (153)
---------------------------------------
Consolidated net premiums earned 125,822 109,322
Net investment income 28,193 27,109
Realized gains (losses) (5,461) 877
Other revenues 3,387 3,138
---------------------------------------
Consolidated revenues $ 151,941 $ 140,446
=======================================
Components of operating income (loss) (1):
PMA Re $ 13,983 $ 12,749
The PMA Insurance Group 5,602 4,985
Caliber One (2,273) (696)
Corporate and Other (5,112) (4,768)
---------------------------------------
Pre-tax operating income $ 12,200 $ 12,270
=======================================
After-tax operating income $ 7,928 $ 7,898
=======================================
Net income $ 4,378 $ 5,709
=======================================
Weighted average common shares outstanding:
Basic 22,265,688 23,317,630
Diluted 22,816,287 24,103,452
After-tax operating income per share:
Basic $ 0.36 $ 0.34
=======================================
Diluted $ 0.35 $ 0.33
=======================================
Net income per share:
Basic $ 0.20 $ 0.24
=======================================
Diluted $ 0.19 $ 0.24
=======================================
Balance Sheet Data: March 31, 2000 December 31, 1999
- --------------------------------------------------- -------------- -----------------
Total assets $ 3,283,358 $ 3,245,087
Shareholders' equity $ 438,624 $ 429,143
Shareholders' equity per share (including FAS 115) $ 19.83 $ 19.21
Shareholders' equity per share (excluding FAS 115) $ 21.42 $ 21.22
- ----------------------------------------------------------------------------------------------------------------
<FN>
(1) Pre-tax operating income (loss) represents pre-tax income (loss) from continuing operations, but excluding
net realized investment gains (losses). After-tax operating income (loss) is net income (loss) excluding
after-tax net realized investment gains (losses) and the cumulative effect of accounting changes.
</FN>
</TABLE>
5
[LOGO] PMA CAPITAL
A Specialty Risk Management Company
Mellon Bank Center Suite 2800
1735 Market Street
Philadelphia, PA 19103-7590 PRESS RELEASE
================================================================================
For Release: Immediate
Contact: Albert D. Ciavardelli
(215) 665-5063
PMA Capital Corporation Adopts Shareholder Rights Plan
------------------------------------------------------
Philadelphia, PA, May 3, 2000 -- PMA Capital Corporation (NASDAQ: PMACA)
announced today that its Board of Directors has adopted a shareholder rights
plan in which rights will be distributed as a dividend at the rate of one Right
for each share of Common Stock held by shareholders of record as of the close of
business on May 22, 2000. The Rights will expire on May 22, 2010. The Rights
will also attach to any newly issued shares of Class A Common Stock. The rights
plan was not adopted in response to any takeover attempt.
"The Company's rights plan is designed to protect our shareholders' right to
retain their equity investment in the Company and receive full value for their
investment," stated John W. Smithson, President and Chief Executive Officer.
Initially, each Right will be represented by the Company's Class A Common Stock,
will not be traded separately from the Class A Common Stock and will not be
exercisable. The Rights will be exercisable only if a person or group acquires
beneficial ownership of 15% or more of the Company's Class A Common Stock, or
announces or starts a tender or exchange offer that would result in beneficial
ownership of 15% or more of the outstanding Class A Common Stock in a
transaction not approved by the Company's Board.
Subject to certain exemptions, if any person becomes the beneficial owner of 15%
or more of the Company's Class A Common Stock, then each Right not owned by the
15%-or-more shareholder will entitle its holder to purchase shares of the
Company's Class A Common Stock at half-price, and in the event of a subsequent
merger, to purchase, at the Right's then current exercise price, shares of
common stock of the acquirer having a value of twice the Right's then current
exercise price.
The Company will generally be entitled to redeem the Rights for $.001 per Right,
subject to adjustment, at any time until the close of business on the tenth day
after a person acquires a 15% position in the Company's Class A Common Stock.
The Company will mail a summary of the shareholder rights plan to its
shareholders.
<PAGE>
PMA Capital Corporation, headquartered in Philadelphia, Pennsylvania, is an
insurance holding company, whose operating subsidiaries provide specialty risk
management products and services to customers throughout the United States. The
primary product lines of PMA Capital's subsidiaries include: 1) property and
casualty reinsurance, underwritten and marketed through PMA Re; 2) managed care
workers' compensation, integrated disability and other commercial property and
casualty lines of insurance in the Mid-Atlantic and Southern regions of the
United States, underwritten and marketed under the trade name The PMA Insurance
Group; and 3) excess and surplus lines coverages, underwritten and marketed by
Caliber One.
