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Share Name | Share Symbol | Market | Type |
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Pma Capital Corp. (MM) | NASDAQ:PMACA | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 7.54 | 0 | 01:00:00 |
PMA Capital Corporation (NASDAQ: PMACA) today reported the following financial results for the second quarter and first six months of 2010:
Three months ended Six months ended June 30, June 30, (in thousands, except per share data) 2010 2009 2010 2009 Operating income $ 1,386 $ 4,074 $ 9,203 $ 11,890 Net realized investment gains (losses) after tax 737 (307 ) 1,014 180 Income from continuing operations 2,123 3,767 10,217 12,070 Loss from discontinued operations after tax - (1,165 ) - (1,251 ) Net income $ 2,123 $ 2,602 $ 10,217 $ 10,819Diluted per share amounts:
Operating income $ 0.05 $ 0.13 $ 0.29 $ 0.37 Realized gains (losses) after tax 0.02 (0.01 ) 0.03 0.01 Income from continuing operations 0.07 0.12 0.32 0.38 Loss from discontinued operations after tax - (0.04 ) - (0.04 ) Net income $ 0.07 $ 0.08 $ 0.32 $ 0.34Vincent T. Donnelly, President and Chief Executive Officer, commented, “We had another quarter of positive earnings results despite the prolonged challenges in the marketplace. However, our operating results in the second quarter were adversely impacted by return premium adjustments, primarily from audits, and costs incurred in connection with our pending merger, which contributed to the decline in our earnings from the prior year. Although our 2010 insured payrolls on renewal business are up 1%, payrolls on expiring workers’ compensation policies were less than expected, resulting in audit return premiums. Return premium adjustments reduced our operating income by $1.7 million after-tax, or five cents per diluted share, in the quarter. Costs incurred in connection with our pending merger with Old Republic reduced operating income by $1.1 million after-tax, or three cents per diluted share.”
At The PMA Insurance Group, Mr. Donnelly noted the following operating highlights:
Fee-based Business operating highlights included:
As previously announced on June 10, 2010, Old Republic International Corporation and PMA Capital Corporation entered into a merger agreement pursuant to which Old Republic will acquire all of PMA’s outstanding common stock. The transaction is expected to close near the end of the third quarter, subject to approval by PMA’s shareholders, regulatory approvals and other customary closing conditions.
Financial Condition
Total assets were $2.4 billion as of June 30, 2010 and December 31, 2009. At June 30, 2010, we had $23.8 million in cash and short-term investments at our holding company and non-regulated subsidiaries.
Shareholders’ equity and book value per share changed as follows:
Three months ended Six months ended June 30, 2010 June 30, 2010 (in thousands, except per share data)Shareholders'equity
Book valueper share
Shareholders'equity
Book valueper share
Balance, beginning of period $ 418,130 $ 12.96 $ 401,797 $ 12.46 Net income 2,123 0.07 10,217 0.32 Unrealized gain on securities, net of tax 8,619 0.26 16,608 0.51 Other 329 0.01 579 0.01 Balance, end of period $ 429,201 $ 13.30 $ 429,201 $ 13.30Segment Operating Results
Operating income, which we define as net income under accounting principles generally accepted in the United States (GAAP) excluding net realized investment gains and losses and results from discontinued operations, is the financial performance measure used by our management and Board of Directors to evaluate and assess the results of our businesses. Net realized investment activity is excluded because (i) net realized investment gains and losses are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains and losses that do not relate to the operations of the individual segments. Operating income does not replace net income as the GAAP measure of our consolidated results of operations.
The following is a reconciliation of our operating results to GAAP net income:
Three months ended Six months ended June 30, June 30, (dollar amounts in thousands) 2010 2009 2010 2009 Pre-tax operating income (loss): The PMA Insurance Group $ 6,998 $ 9,965 $ 21,265 $ 25,152 Fee-based Business 1,209 1,525 3,514 3,538 Corporate & Other (6,023 ) (5,167 ) (10,389 ) (10,167 ) Pre-tax operating income 2,184 6,323 14,390 18,523 Income tax expense 798 2,249 5,187 6,633 Operating income 1,386 4,074 9,203 11,890 Net realized investment gains (losses) after tax 737 (307 ) 1,014 180 Income from continuing operations 2,123 3,767 10,217 12,070 Loss from discontinued operations after tax - (1,165 ) - (1,251 ) Net income $ 2,123 $ 2,602 $ 10,217 $ 10,819Income from continuing operations included the following after-tax net realized investment gains (losses):
Three months ended Six months ended June 30, June 30, (dollar amounts in thousands) 2010 2009 2010 2009 Net realized investment gains (losses) after tax: Sales of investments $ 737 $ 362 $ 1,014 $ 3,390 Other than temporary impairments - (669 ) - (3,210 ) Net realized investment gains (losses) after tax $ 737 $ (307 ) $ 1,014 $ 180Details of the Company’s investment portfolio at June 30, 2010 and December 31, 2009 are posted on our website at www.pmacapital.com.
The PMA Insurance Group
The PMA Insurance Group had pre-tax operating income of $7.0 million for the second quarter of 2010, compared to $10.0 million for the second quarter of 2009. Year-to-date pre-tax operating income was $21.3 million, compared to $25.2 million for the first half of 2009. Pre-tax operating income was reduced by $2.5 million in 2010 for the net impact of the second quarter return premium adjustments.
We define direct premium production as direct premiums written, excluding fronting premiums and premium adjustments. The following is a reconciliation of our direct premium production to consolidated gross premiums written:
Three months ended Six months ended June 30, June 30, (dollar amounts in thousands) 2010 2009 2010 2009 Direct premium production $ 107,038 $ 102,212 $ 264,130 $ 249,579 Fronting premiums 9,457 9,677 25,252 29,299 Premium adjustments (8,105 ) (2,753 ) (10,124 ) (7,629 ) Direct premiums written 108,390 109,136 279,258 271,249 Assumed premiums and other 1,468 4,288 2,505 6,245 Gross premiums written $ 109,858 $ 113,424 $ 281,763 $ 277,494Direct premium production included new business of $25.0 million in the second quarter and $59.5 million for the first half of 2010, compared to $33.4 million and $71.4 million during the same periods last year. Pricing on our rate-sensitive workers’ compensation business increased 1% during the first six months of 2010, compared to a 3% decrease during the same period a year ago. Our renewal retention rates on existing workers’ compensation accounts increased to 79% for the second quarter and 81% for the first six months of 2010, compared to 78% and 79% for the same periods in 2009. During the first six months of 2010, our retention rates and new business for workers’ compensation were higher for business written on a loss-sensitive basis than for business written on a rate-sensitive basis, as we continue to emphasize loss-sensitive business.
The increases in premium adjustments for both periods in 2010 primarily reflected increases in audit return premiums as payrolls on expiring workers’ compensation policies were less than expected.
Net premiums written were $75.6 million in the second quarter of 2010, compared to $80.4 million in the second quarter of 2009. The decrease for the quarter is mainly due to the impact of return premium adjustments and, to a lesser extent, lower assumed premiums. For the first six months of 2010, net premiums written increased to $203.9 million, compared to $198.6 million during the same period last year. The increase in the first half of 2010 primarily reflected the increase in direct premium production for the period, partially offset by the impact of return premium adjustments and lower assumed premiums.
Net premiums earned were $100.2 million in the second quarter of 2010, compared to $107.1 million in the second quarter of 2009. For the first six months of 2010, net premiums earned were $203.8 million, compared to $212.2 million for the first half of 2009. The decreases for both periods primarily reflect the impact of return premium adjustments and lower assumed premiums.
The combined ratio on a GAAP basis was 101.7% for the second quarter of 2010, compared to 99.4% in the second quarter last year. On a year-to-date basis, the combined ratio was 98.3% in 2010, compared to 96.5% for the same period in 2009. The higher combined ratios in both periods were primarily the result of increases in the loss and LAE and operating expense ratios.
The loss and LAE ratios increased by 1.6 points in the second quarter and 0.9 points in the first six months of 2010, compared to the same prior year periods. Pricing and payroll increases for rate-sensitive workers’ compensation business were slightly below overall estimated loss trends. Losses and LAE in 2010 also included expenses incurred on a new claims system which was implemented in both our insurance and fee-based businesses. We estimate our medical cost inflation to be 6.0% in the first six months of 2010 and 2009.
Operating expenses increased $718,000 in the second quarter and $921,000 in the first six months of 2010, compared to the same periods last year, primarily due to higher consulting and employee-related costs.
Net investment income was $8.8 million in the second quarter of 2010, compared to $9.5 million in the same period last year. The decrease in the quarter was due primarily to lower yields on our investment portfolio, which were partially offset by an increase in average invested assets. Year-to-date net investment income was $18.0 million for both 2010 and 2009.
Fee-based Business
For the second quarter of 2010, total revenues at our Fee-based Business increased to $21.2 million, up from $19.5 million for the same period last year. For the first six months of 2010, total revenues increased to $42.7 million, compared to $39.2 million for the first half of 2009. The increases in revenues primarily reflected claims service revenue growth of $1.3 million and $3.2 million for the second quarter and first six months of 2010. Pre-tax operating income was $1.2 million for the second quarter of 2010, compared to $1.5 million for the same quarter last year, and was $3.5 million for the first six months in both years. The decline in return on revenue in 2010 was primarily due to higher expenses at our agency business.
Corporate and Other
The Corporate and Other segment, which includes primarily corporate expenses and debt service, had net expenses of $6.0 million during the second quarter of 2010, compared to $5.2 million in the second quarter of 2009. Net expenses were $10.4 million during the first six months of 2010, compared to $10.2 million for the same period in 2009. The increases in net expenses for both periods in 2010 were mainly due to costs incurred related to the pending merger transaction with Old Republic that were partially offset by lower stock-based compensation expense and certain 2009 intercompany transactions with our former run-off operations which were eliminated in the Corporate and Other segment. The costs incurred during the second quarter of 2010 related to the merger were $1.6 million.
Quarterly Statistical Supplement
Our Second Quarter Statistical Supplement, which provides more detailed information about our results, is available on our website. Please see the Investor Information section of our website at www.pmacapital.com. You may also obtain a copy of this supplement by sending your request to:
PMA Capital Corporation380 Sentry ParkwayBlue Bell, PA 19422Attention: Investor Relations
Alternatively, you may make a request by telephone (610-397-5298) or by e-mail to InvestorRelations@pmacapital.com. We will also furnish a copy of this news release and the Statistical Supplement to the Securities and Exchange Commission on a Form 8-K. A copy of the Form 8-K will be available on the SEC’s website at www.sec.gov.
CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 with respect to the Company’s financial condition and results of operations and the plans, strategy and objectives of its management. Forward-looking statements can generally be identified by use of forward-looking terminology such as “may,” “will,” “plan,” “expect,” “intend,” “anticipate,” “should” and “believe.” These forward-looking statements may include estimates, assumptions or projections and are based on currently available financial, competitive and economic data and the Company’s current operating plans. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. The factors that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to:
You should not place undue reliance on any forward-looking statements in this press release. Forward-looking statements are not generally required to be publicly revised as circumstances change and we do not intend to update the forward-looking statements in this press release to reflect circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
PMA Capital Corporation GAAP Consolidated Statements of Operations (Unaudited) Three months ended June 30, (dollar amounts in thousands, except per share data) 2010 2009 Gross premiums written $ 109,858 $ 113,424 Net premiums written $ 75,401 $ 80,302 Revenues: Net premiums earned $ 100,031 $ 106,949 Claims service revenues 18,374 16,835 Commission income 2,345 2,117 Net investment income 8,734 9,561 Net realized investment gains (losses) 1,134 (472 ) Other revenues 394 190 Total revenues 131,012 135,180 Expenses: Losses and loss adjustment expenses 70,340 73,494 Acquisition expenses 17,595 19,508 Operating expenses 35,206 31,540 Dividends to policyholders 2,051 2,311 Interest expense 2,502 2,476 Total losses and expenses 127,694 129,329 Pre-tax income 3,318 5,851 Income tax expense: Current 263 265 Deferred 932 1,819 Total income tax expense 1,195 2,084 Income from continuing operations 2,123 3,767 Loss from discontinued operations after tax - (1,165 ) Net income $ 2,123 $ 2,602 Income (loss) per share: Basic: Continuing Operations $ 0.07 $ 0.12 Discontinued Operations - (0.04 ) $ 0.07 $ 0.08 Diluted: Continuing Operations $ 0.07 $ 0.12 Discontinued Operations - (0.04 ) $ 0.07 $ 0.08 PMA Capital Corporation GAAP Consolidated Statements of Operations (Unaudited) Six months ended June 30, (dollar amounts in thousands, except per share data) 2010 2009 Gross premiums written $ 281,763 $ 277,494 Net premiums written $ 203,646 $ 198,280 Revenues: Net premiums earned $ 203,527 $ 211,879 Claims service revenues 36,257 32,519 Commission income 5,437 5,580 Net investment income 17,854 18,018 Net realized investment gains 1,560 277 Other revenues 786 366 Total revenues 265,421 268,639 Expenses: Losses and loss adjustment expenses 145,410 149,269 Acquisition expenses 35,642 36,706 Operating expenses 60,838 55,925 Dividends to policyholders 2,575 2,957 Interest expense 5,006 4,982 Total losses and expenses 249,471 249,839 Pre-tax income 15,950 18,800 Income tax expense: Current 517 509 Deferred 5,216 6,221 Total income tax expense 5,733 6,730 Income from continuing operations 10,217 12,070 Loss from discontinued operations after tax - (1,251 ) Net income $ 10,217 $ 10,819 Income (loss) per share: Basic: Continuing Operations $ 0.32 $ 0.38 Discontinued Operations - (0.04 ) $ 0.32 $ 0.34 Diluted: Continuing Operations $ 0.32 $ 0.38 Discontinued Operations - (0.04 ) $ 0.32 $ 0.34 PMA Capital Corporation GAAP Consolidated Balance Sheets (Unaudited) June 30, December 31, (dollar amounts in thousands, except per share data) 2010 2009 Assets: Investments: Fixed maturities available for sale $ 778,747 $ 791,355 Short-term investments 25,854 41,072 Other investments 33,701 30,226 Total investments 838,302 862,653 Cash 15,933 11,059 Accrued investment income 6,852 7,352 Premiums receivable 251,566 238,650 Reinsurance receivables 854,522 827,458 Prepaid reinsurance premiums 36,351 35,788 Deferred income taxes, net 125,381 139,782 Deferred acquisition costs 40,677 39,124 Funds held by reinsureds 64,299 58,935 Intangible assets 29,349 29,757 Other assets 108,776 112,181 Total assets $ 2,372,008 $ 2,362,739 Liabilities: Unpaid losses and loss adjustment expenses $ 1,267,408 $ 1,269,685 Unearned premiums 241,441 240,759 Debt 132,445 143,380Accounts payable, accrued expenses and other liabilities
243,759 249,787 Reinsurance funds held and balances payable 51,905 51,331 Dividends to policyholders 5,849 6,000 Total liabilities 1,942,807 1,960,942 Shareholders' Equity: Class A Common Stock 171,090 171,090 Additional paid-in capital 111,759 111,841 Retained earnings 165,614 155,747 Accumulated other comprehensive income (loss) 3,001 (14,060 ) Treasury stock, at cost (22,263 ) (22,821 ) Total shareholders' equity 429,201 401,797 Total liabilities and shareholders' equity $ 2,372,008 $ 2,362,739 Shareholders' equity per share $ 13.30 $ 12.46
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