A.M. Best Places Ratings of PMA Capital Corporation and Its Subsidiaries Under Review with Negative Implications
June 02 2009 - 3:08PM
Business Wire
A.M. Best Co. has placed the issuer credit rating (ICR)
of �bb� and the existing debt ratings of PMA Capital
Corporation (PMA Capital) (Blue Bell, PA) (NASDAQ: PMACA),
under review with negative implications. Concurrently, A.M. Best
has placed the financial strength rating (FSR) of A- (Excellent)
and ICRs of �a-� of the subsidiaries of PMA Capital, PMA
Insurance Group (PMA) (Blue Bell, PA) and its pooled members,
Pennsylvania Manufacturers� Association Insurance Company,
Pennsylvania Manufacturers Indemnity Company and
Manufacturers Alliance Insurance Company, under review with
negative implications.
Additionally, the FSR of C++ (Marginal) and ICR of �b� for
PMA Capital Insurance Company (PMACIC) (Philadelphia, PA),
the run-off operations of PMA Capital, remain under review with
negative implications. (See below for a detailed listing of the
companies and ratings.)
These rating actions reflect the shortfall in overall
capitalization at PMACIC, concern over the sale of the run-off
operations and potential ongoing exposure to PMA Capital upon the
sale closing. Additionally, while operating results have improved
in each of the past five years and the capital at PMA is currently
adequate for its rating level, risk-adjusted capital ratios have
decreased in the past two years. This decrease is due to business
growth in 2007 and an investment portfolio of unrealized losses at
year-end 2008. Furthermore, any negative deviations from projected
underwriting or investment performance, including any further
decline in valuations from its investment portfolio, could result
in additional rating pressure. All ratings will remain under review
pending A.M. Best�s review of management�s plan to improve PMA�s
overall capitalization and liquidity, the successful execution of
the capital funding and resolution of the sale of PMACIC.
While PMA Capital has historically provided access to capital,
the under review status reflects A.M. Best�s concern with the
parent�s ability to improve overall capitalization of its
subsidiaries given its limited financial flexibility. Furthermore,
the ongoing cost of interest payments on existing debt, combined
with other holding company obligations and the potential future
funding requirements more that offset PMA Capital�s current sources
of income.
The FSR of A- (Excellent) and ICRs of �a-� have been placed
under review with negative implications for PMA Insurance
Group and its following members:
- Manufacturers Alliance
Insurance Company
- Pennsylvania Manufacturers�
Association Insurance Company
- Pennsylvania Manufacturers
Indemnity Company
The ICR of �bb� has been placed under review with negative
implications for PMA Capital Corporation.
The following debt ratings have been placed under review with
negative implications: �
PMA Capital
Corporation�
-- �bb� on $54.9 million 8.5% senior unsecured note, due 2018 --
�bb� on $45,000 4.25% senior unsecured convertible debentures, due
2022 -- �bb-� on $64.44 million variable rate junior subordinated
debt, due 2037 -- �bb+� on $10.0 million variable rate surplus
note, due 2035
The FSR of C++ (Marginal) and ICR of �b� remain under review
with negative implications for PMA Capital Insurance
Company.
For Best�s Credit Ratings, an overview of the rating process and
rating methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings,
including any additional methodologies and factors that may have
been considered, can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service
credit rating organization dedicated to serving the financial and
health care service industries, including insurance companies,
banks, hospitals and health care system providers. For more
information, visit www.ambest.com.
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