CHICAGO - (Business Wire) Fitch Ratings has affirmed PMA Capital Corp.'s (PMACC) Issuer Default Rating (IDR) and senior debt rating of 'BBB-' and 'BB+' respectively. Fitch also has affirmed the 'BBB+' Insurer Financial Strength (IFS) ratings of the three active primary insurance subsidiaries collectively referred to as PMA Insurance Group, (PMAIG): Pennsylvania Manufacturers Association Insurance Company (PMAIC); Pennsylvania Manufacturers Indemnity Company (PMIC); and Manufacturers Alliance Insurance Company (MAIC). Finally, Fitch has withdrawn the 'B-' IFS rating of PMA Capital Insurance Company's (PMA Re) run-off reinsurance subsidiary. All Rating Outlooks are Stable.
Fitch's affirmation of PMAIG's ratings is a reflection of the company's improved underwriting performance, enhanced organizational risk profile, and strong capital position.
Offsetting these positives are Fitch's concerns of profitability deterioration due to the competitive operating environment and the company's growth during a softening market.
On March 28, 2008, PMACC entered into a stock purchase agreement with Armour Reinsurance Group Limited (Armour), a Bermuda-based company for the sale of the run-off operations. The purchase price was structured in two parts: $10 million cash upon closing and a $10 million contingent promissory note paid in 5 years.
The principal and interest of the note is subject to negative adjustments in the net loss and ULAE (unallocated loss adjustment expense) reserves in the consolidated financials of the purchased entities up to and including the maturity of note. During the first quarter of 2008, the company took adverse reserve development of $4 million thereby reducing the expected cash to be received and the contingent note to $6 million.
Fitch believes this transaction will likely close in the third quarter. Fitch is withdrawing the rating on PMA Re due to a lack of continuing information on a go-forward basis.
As of March 31, 2008, PMAIG had net premiums written of $113.9 million, compared with $125.9 million for the same period in the prior year. PMAIG reported a 94.5% GAAP combined ratio as of March 31, 2008 compared with a 98.2% for March 31, 2007.
Fitch has affirmed the following companies' IFS rating of 'BBB+' with a Stable Outlook.
--Manufacturers Alliance Insurance Co.
--Pennsylvania Manufacturers' Association Insurance Co.
--Pennsylvania Manufacturers Indemnity Co.
Fitch has withdrawn the IFS rating of the following entity:
--PMA Capital Insurance Company.
In addition, Fitch has affirmed the following ratings:
PMA Capital Corp.
--IDR at 'BBB-', with a Stable Outlook;
--Senior debt rating at 'BB+'
--$54.9 million senior notes, 8.5% due June 15, 2018 at 'BB+'
--$0.455 million convertible debt, 4.25% due Sept. 9, 2022 at 'BB+'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, Chicago
Gerald B. Glombicki, 312-606-2354
James B. Auden, CFA, 312-368-3146
or
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