PMA Capital Corp. Affirmed

S&P affirmed its “A” counterparty credit and FSR on four subsidiaries of PMA Capital Corp. (PMA Corp.): PMA Capital Insurance Co. (PMA Re) and the three members of PMA Insurance Group (PMAIG)—Pennsylvania Manufacturers Association Insurance Co., Pennsylvania Manufacturers Indemnity Co., and Manufacturers Alliance Insurance Co.

At the same time, S&P revised its outlook on these companies to negative from stable.

The revised outlook reflects lower-than-expected earnings at the operating subsidiaries, which are largely the result of reserve-strengthening actions taken by management at PMA Re in the third quarter of 2000 and at Caliber One Indemnity Co. (PMA Corp.’s excess-and-surplus subsidiary) in the first quarter of 2001. In the past, PMA Corp.’s consolidated operating results benefited to some extent from reserve releases at its operating subsidiaries (particularly at PMA Re), but S&P believes the group’s current lack of a reserve cushion will challenge management to achieve future profitability targets without the aid of such releases.

Offsetting these factors are PMA Re’s strong business position in the reinsurance market and continued operating improvements at PMAIG, following its restructuring in 1996. Further, capital adequacy at the operating companies remains extremely strong, with a consolidated capital adequacy ratio of 182 percent at year-end 2000.