Philadelphia-based PMA Capital announced a net fourth quarter loss of $20 million, or 64 cents per share, compared with a net loss of $10.4 million, or 33 cents per share, for the fourth quarter of 2002. The Company also announced that its Board of Directors has elected Vincent T. Donnelly as President and Chief Executive Officer.
PMA noted that the results for the fourth quarter of 2003 included a “non-cash charge of $25 million, or 80 cents per share, to increase the valuation allowance for our deferred tax asset, and an after-tax charge of $3.7 million, or 12 cents per share, as a result of our decision to exit the reinsurance business, mainly for termination benefits. For full year 2003, we recorded a net loss of $93.6 million, or $2.99 per share, compared to $48.0 million, or $1.53 per share, for 2002.”
Donnelly, who had headed the PMA insurance Group, has been acting president since last November, following the resignation of John Smithson as president and CEO and Frederick Anton’s withdrawal as Chairman of the Board.
PMA said it had completed both the internal and external reserve studies undertaken in the fourth quarter. It noted that the “fourth quarter of 2003 includes a net charge of $4.6 million ($7.0 million pre-tax), or 15 cents per share, due to lower underwriting results at The PMA Insurance Group for workers’ compensation business written for accident years 2001 and 2002.” It also said it had updated a previously completed comprehensive study of PMA Re’s loss reserves and had “concluded that no additions to PMA Re’s loss reserves for prior years were required during the fourth quarter.”
PMA noted: “Results for full year 2003 include the third quarter after-tax charge of $97.5 million, or $3.11 per share, to increase PMA Re’s loss reserves. That charge reflected adverse prior year loss development, primarily from casualty business written in accident years 1997 through 2000. In addition, the total valuation allowance on the deferred tax asset of $49 million recorded in 2003 impacted results by $1.56 per share for the full year.”
Donnelly commented, “The results of these reviews have reaffirmed our confidence in the adequacy of our loss reserves for all of our insurance operations at December 31, 2003, and we believe that our future results will not be affected by further prior year reserve strengthening. We believe the actions we have taken put this issue of reserve development behind us.”
The stock market apparently shares that view, as the company’s shares rose by around 13 percent on the NASDAQ Exchange in anticipation of the good news that its loss reserves appear adequate.
Donnelly continued: “At The PMA Insurance Group, we are focused on continuing to deliver outstanding service to our customers and producers and appreciate the numerous customers, agents and brokers who have stood by us. The capital position of The PMA Insurance Group remains strong and continues to provide the financial strength and security we have delivered to the market over many years. Premium production during the fourth quarter and January 2004 was in line with our expectations. I want to reaffirm that our main objective is to restore the ‘A-‘ (Excellent) A.M. Best financial strength rating of The PMA Insurance Group. The run-off of our reinsurance business is continuing in an efficient manner, and we will evaluate opportunities to employ the excess capital to be generated as the run-off continues. We are confident that we have the financial strength, commitment and expertise to succeed in 2004 and beyond.”
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