A.M. Best Downgrades Ratings of PMA Capital Insurance Company; Ratings Remain Under Review with Negative Implications

A.M. Best Co. has downgraded the financial strength rating (FSR) to C++ (Marginal) from B (Fair) and issuer credit rating (ICR) to "b” from "bb” of PMA Capital Insurance Company (PMACIC) (Philadelphia, PA), the run-off operations of PMA Capital Corporation (PMA Capital) (Blue Bell, PA) [NASDAQ: PMACA], following the recent reserve strengthening actions occurring during third quarter 2008. Additionally, the ratings remain under review with negative implications as a result of the announcement earlier this year that PMACIC’s parent, PMA Capital, entered into a letter of intent and subsequently signed a stock purchase agreement with a third party to sell PMACIC. The ratings of PMA Capital and PMA Insurance Group (Blue Bell, PA) and its members are unchanged.

The downgrading of PMACIC’s ratings reflect the significant reduction in its stand-alone capitalization following additional reserve strengthening actions during the first and third quarters of 2008, impacting claims made general liability business and, to a lesser extent, occurrence liability business. Partially offsetting these negative rating factors is PMA Capital’s commitment to maintain adequate capitalization to support the run-off operations following the recent reserve strengthening actions. While capitalization remains marginal, A.M. Best expects ongoing financial support from PMA Capital to ensure an orderly run off.

The under review status of PMACIC’s ratings reflect the planned sale to a third party and uncertainty with the level of commitment of the new parent to sustain operations, as well as the continued execution risk associated with managing the run-off business.

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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.