A.M. Best Comments on Old Republic International Corporation’s Planned Acquisition of PMA Capital Corporation

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.

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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.