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): June 18, 2004
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.
On June 18, 2004, we put into place an adverse development reinsurance
agreement to cover potential adverse development of the loss reserves of our
run-off operations. Our run-off operations consist of the results of our former
reinsurance and excess and surplus lines businesses. Although we believe the
reserves of our run-off operations are adequate, the agreement will provide
protection in the event that these loss reserves do not develop as currently
anticipated. This reinsurance has been placed with third party reinsurers and
provides for our transferring to the reinsurers $100 million of assets in
exchange for coverage for adverse development of up to $120 million over the
loss reserves. If development on the loss reserves exceeds $120 million, we will
be required to pay up to $35 million in additional premiums, at certain
contractually determined levels, for an additional $85 million of coverage.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this report 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:
|O| our ability to effect an efficient withdrawal from the reinsurance
business, including the commutation of reinsurance business with
certain large ceding companies, without incurring any significant
liabilities;
|O| regulatory or tax changes in risk-based capital or other regulatory
standards that affect the cost of, or demand for, our products or
otherwise affect our ability to conduct business, including any future
action with respect to our business taken by the Pennsylvania Insurance
Department or any other state insurance department;
|O| The PMA Insurance Group's ability to have its A- A.M. Best financial
strength rating restored and the effect of its B++ A.M. Best rating on
its premium writings and profitability as well as the adverse impact of
any potential future downgrade of its rating;
|O| The ability of the Company to have sufficient cash at the holding
company to meet its debt service and other obligations, including any
restrictions such as in our letter agreement with the Pennsylvania
Insurance Department on receiving dividends from its insurance
subsidiaries in an amount sufficient to meet such obligations;
2
|O| the lowering or loss of one or more of the Company's debt ratings, and
the adverse impact that any such downgrade may have on our ability to
raise capital and our liquidity and financial condition;
|O| adequacy of reserves for claim liabilities;
|O| adverse property and casualty loss development for events that we
insured in prior years, including unforeseen increases in medical
costs;
|O| the impact of future results on the recoverability of our deferred tax
asset;
|O| adequacy and collectability of reinsurance that we purchased;
|O| the outcome of any litigation against the Company, including the
outcome of the purported class action lawsuits;
|O| competitive conditions that may affect the level of rate adequacy
related to the amount of risk undertaken and that may influence the
sustainability of adequate rate changes;
|O| ability to implement and maintain rate increases;
|O| the effect of changes in workers' compensation statutes and their
administration, which may affect the rates that we can charge and the
manner in which we administer claims;
|O| our ability to predict and effectively manage claims related to
insurance and reinsurance policies;
|O| the uncertain nature of damage theories and loss amounts and the
development of additional facts related to the attack on the World
Trade Center;
|O| uncertainty as to the price and availability of reinsurance on business
we intend to write in the future, including reinsurance for terrorist
acts;
|O| severity of natural disasters and other catastrophes, including the
impact of future acts of terrorism, in connection with insurance and
reinsurance policies;
|O| changes in general economic conditions, including the performance of
financial markets, interest rates and the level of unemployment;
|O| uncertainties related to possible terrorist activities or international
hostilities; and
|O| other factors disclosed from time to time in our most recent Forms 10-K
and 10-Q filed with the Securities and Exchange Commission.
You should not place undue reliance on any such forward-looking statements.
Unless otherwise stated, we disclaim any current intention to update
forward-looking information and to release publicly the results of any future
revisions we may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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: June 18, 2004 By: /s/ William E. Hitselberger
------------------------------------
William E. Hitselberger
Executive Vice President, Chief
Financial Officer and Treasurer