A.M. Best Removes Ratings of PMA Capital Corporation and Its Subsidiaries From Under Review With Negative Implications
January 29 2010 - 3:00PM
Business Wire
A.M. Best Co. has removed from under review with negative
implications the issuer credit rating (ICR) and debt ratings of
PMA Capital Corporation (PMA Capital) (Blue Bell, PA)
[NASDAQ: PMACA] following completion of the sale of PMA Capital
Insurance Company (PMACIC) (Philadelphia, PA), the former
run-off operation of PMA Capital. A.M. Best also has upgraded the
ICR to “bbb-” from “bb” and debt ratings of PMA Capital.
Concurrently, A.M. Best has removed from under review with
negative implications and affirmed the FSR of A- (Excellent) and
ICRs of “a-” of PMA Insurance Group (PMA) (Blue Bell, PA)
and its pooled members.
Additionally, A.M. Best has removed from under review with
negative implications and affirmed the financial strength rating
(FSR) of C++ (Marginal) and ICR of “b” of PMACIC following its sale
to Armour Reinsurance Group Limited, an indirect wholly owned
subsidiary of Brevan Howard P&C Master Fund Limited.
Subsequently, the ratings have been withdrawn, and an NR-5 (Not
Formally Followed) has been assigned to the FSR and an “nr” to the
ICR.
With the exception of PMACIC, all ratings have been assigned a
stable outlook. (See below for a detailed listing of the companies
and ratings.)
These rating actions follow the close of the sale of PMACIC,
which eliminates the uncertainty surrounding ongoing funding
requirements for both PMA Capital and PMA, as well as the improved
overall capitalization and liquidity across the organization. Under
the terms of the sale, PMA Capital was required to contribute cash
of approximately $3.1 million at the close of the transaction,
while providing a note payable in two installments of $5 million
each in 2010 and 2011. Furthermore, PMA Capital provided two
contingent capital support agreements to PMACIC that may require
PMA Capital to make payments to PMACIC in the event claim payments
within the excess workers' compensation and certain excess
liability (occurrence) lines of business exceed pre-established
limits. Subsequent to the close of the transaction, PMACIC was
renamed Excalibur Reinsurance Corporation.
The FSR of A- (Excellent) and ICRs of “a-” have been affirmed
for PMA Insurance Group and its following members:
- Manufacturers Alliance
Insurance Company
- Pennsylvania Manufacturers’
Association Insurance Company
- Pennsylvania Manufacturers
Indemnity Company
The ICR has been upgraded to “bbb-” from “bb” for PMA Capital
Corporation.
The following debt ratings have been upgraded:
PMA Capital Corporation—
-- to “bbb-” from “bb” on $54.9 million 8.5% senior unsecured
note, due 2018
-- to “bbb-” from “bb” on $45,000 4.25% senior unsecured
convertible debentures, due 2022
-- to “bb+” from “bb-” on $64.44 million variable rate junior
subordinated debt, due 2033
-- to “bbb” from “bb+” on $10.0 million variable rate surplus
note, due 2035
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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