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): November 4, 2003
----------------
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)
Item 5. Other Events and Regulation FD Disclosure.
------------------------------------------
The following is an update to the risk factors included in our Form
10-K for the year ended December 31, 2002. This Form 8-K should, therefore, be
read in conjunction with the risk factors included in that periodic report.
Because insurance and credit ratings are important to our policyholders and
creditors, downgrades in our ratings may adversely affect us.
Due to our announcement (attached hereto as Exhibit 99.1) that we will
record a pre-tax charge of approximately $150 million at September 30, 2003
primarily to strengthen loss reserves at our reinsurance operations, on November
4, 2003, we were informed that the principal nationally recognized ratings
agencies that rate the financial strength of our principal insurance
subsidiaries and the debt of PMA Capital Corporation have taken the following
actions on our ratings:
o A.M. Best announced that it has lowered the insurer financial
strength rating of PMA Capital Insurance Company, our
reinsurance subsidiary, from A- (4th of 16) to B++ (5th of
16), and has lowered the insurer financial strength rating of
The PMA Insurance Group (Pennsylvania Manufacturers'
Association Insurance Company, Pennsylvania Manufacturers
Indemnity Company and Manufacturers Alliance Insurance
Company), or the Pooled Companies, our primary insurance
subsidiaries, from A- (4th of 16) to B++ (5th of 16). All of
these ratings are under review with negative implications.
o Standard & Poor's announced that it has lowered the insurer
financial strength of PMA Capital Insurance Company from A-
(7th of 21) to BBB- (10th of 21), and has lowered the insurer
financial strength of the Pooled Companies from A- (7th of 21)
to BBB (9th of 21). Standard & Poor's also lowered the senior
debt ratings on PMA Capital Corporation from BBB- (10th of 22)
to BB- (13th of 22). All of these ratings are on credit watch
with negative implications.
o Moody's Investors Service announced that it has lowered the
insurer financial strength of PMA Capital Insurance Company
from Baa1 (8th of 21) to Ba1 (11th of 21), and has lowered the
insurer financial strength of the Pooled Companies from Baa1
(8th of 21) to Baa2 (9th of 21). Moody's also lowered the
senior debt ratings on PMA Capital Corporation from Ba1 (11th
of 21) to Ba3 (13th of 21). All of these ratings are on review
for further possible downgrade.
As we have stated previously, a downgrade in our insurer financial
strength ratings could result in a material loss of business as policyholders
move to other companies with higher financial strength ratings. We believe that
the aforementioned downgrades, especially the A.M. Best downgrades, will
materially impair the ability of our reinsurance operations to write business
and will significantly impair the ability of our primary insurance operations to
write business. Any further downgrades to our insurer financial strength ratings
would have a material adverse effect on our results of operations, liquidity and
capital resources.
The downgrade in our debt ratings will affect our ability to raise
additional debt with terms and conditions similar to our current debt, and,
accordingly, will increase our cost of capital. In addition, this downgrade of
our debt ratings will make it more difficult to raise capital to refinance any
2
maturing debt obligations and to maintain or improve the current financial
strength ratings of our principal insurance subsidiaries.
If Standard & Poor's lowers the debt rating assigned to our 4.25%
Senior Convertible Debentures due 2022, or the Debentures, below BB- and Moody's
lowers the debt rating assigned to the Debentures below Ba3, or the ratings
assigned to the Debentures are suspended or withdrawn, or only one rating agency
is rating the Debentures and the rating is below the levels specified in this
sentence, then each $1,000 principal amount of the Debentures, of which $87.25
million is outstanding, will become convertible into 61.0948 shares of our Class
A common stock at a conversion price of $16.368 per share, subject to adjustment
upon certain events as described in the indenture filed as an exhibit to our
Form 8-K dated October 16, 2002.
These ratings are subject to revision or withdrawal at any time by the
rating agencies, and therefore, no assurance can be given that we or our
principal insurance subsidiaries can maintain these ratings. Each rating should
be evaluated independently of any other rating.
Item 12. Disclosure of Results of Operations and Financial Condition
-----------------------------------------------------------
On November 4, 2003, the registrant issued a news release, a copy of
which is filed as Exhibit 99.1 hereto and is incorporated herein by reference.
The information, including exhibits attached hereto, furnished under
this Item 12 shall be deemed "filed" for the purposes of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The information in this Current
Report shall be incorporated by reference into any registration statement or
other document pursuant to the Securities Act of 1933, as amended, or the
Exchange Act.
3
SIGNATURES
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: November 4, 2003 By: /s/ William E. Hitselberger
------------------------------
William E. Hitselberger
Senior Vice President,
Chief Financial Officer and
Treasurer
4
Index to Exhibits
Number Description Method of Filing
------ ----------- ----------------
99.1 PMA Capital Corporation Filed herewith.
news release dated
November 4, 2003
E-1