A.M. Best Comments on Old Republic International Corporation’s Planned Acquisition of PMA Capital Corporation
June 11 2010 - 4:33PM
Business Wire
A.M. Best Co. has commented that the ratings of Old
Republic International Corporation’s (Old Republic) (Chicago,
IL) [NYSE:ORI] property/casualty, title and life operating
subsidiaries are unchanged following its proposed acquisition of
the outstanding common shares of PMA Capital Corporation
(PMA) (Blue Bell, PA) [NASDAQ:PMACA].
The purchase, valued at approximately $365 million, is to be a
stock-for-stock transaction and is not contingent upon raising
public or private capital. As part of the transaction, Old Republic
will assume PMA’s debt, though this is projected to result in only
a modest increase in Old Republic’s financial leverage. Old
Republic’s debt-to-total capital is expected to rise to just 10.0%
from 8.0%, still a modest level of financial leverage, upon the
close of the acquisition. A.M. Best expects risk-adjusted capital
of Old Republic’s operating companies to remain supportive of their
current ratings following the acquisition. The transaction is
expected to close in third quarter 2010, subject to approval by
PMA’s shareholders, regulatory approvals and other customary
closing conditions.
PMA, whose operating subsidiaries provide insurance and
fee-based services, primarily writes workers’ compensation and
other commercial property and casualty lines of insurance. Old
Republic’s purchase of PMA will significantly increase Old
Republic’s mix of workers’ compensation business within its
property/casualty General Insurance segment to approximately
one-third, while providing greater geographic diversification in
the East. PMA will be operated as a separate Old Republic
subsidiary within the Old Republic General Insurance Group,
retaining existing senior management and its home offices in Blue
Bell, which should help mitigate risks of integration. PMA will be
focused on production, underwriting and claims management, while
investments, capital management and other non-operating areas will
be managed by Old Republic. Efficiencies are expected to be
realized, including PMA no longer having the responsibilities of a
public company.
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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