Excluding the Caliber One results, after-tax operating income for the first quarter of 2002 was $9.8 million, or 32 cents per share.

During a conference call, John W. Smithson, PMA Capital's president and chief executive officer, noted that PMA Capital entered the E&S business in 1997, with the objective of diversifying its companies earnings base beyond earnings generated from its core businesses of workers' compensation, integrated disability management and p-c reinsurance. “That hasnt happened, but we also didnt anticipate the dramatic opportunities available to us in our mature businesses,” he said.

“It is simply better for us to focus our capital on those businesses and to support their growth more fully,” he said, referring to business written in PMA Re and The PMA Insurance Group.

PMA Capital expects its second-quarter 2002 results to include an after-tax charge in the range of $25 million to $30 million (80 cents to 95 cents per share) related to its exit from the E&S segment. Components of that charge will include expenses associated with reinsurance costs for the exited business, long-term lease costs and severance.

Mr. Smithson said that PMA Capital would explore the possibility of selling the Caliber One business, but that the estimated second-quarter charge does not include any costs that might be associated with such a sale.

A possible sale would include Caliber Ones e-commerce solution, which was launched in Febuary, according to Ronald Austin, who was serving as president and chief operating officer of Caliber One prior to the exit announcement. A story which appeared in National Underwriter last week, profiling Caliber One and its e-commerce initiative for excess and umbrella business, went to press before PMA Capital announced its intention to run off Caliber One.

In the first quarter, Caliber One increased its estimated loss and loss adjustment expense reserves by approximately $40 million before taxes.

During the conference call, Mr. Smithson said that Caliber Ones reported claims activity was $6-to-$8 million higher than expected for business written prior to 2001. The claims activity, he said, came from a “handful of sublines of business,” including a trucking program and some miscellaneous casualty classes, but that none had experienced any particularly dramatic spike in claims.

He added that the nursing home business, which was problematic last year, had lower than expected reported claims in first-quarter 2002.

Still, he said, the activity led management to conclude that PMA Capital “would be subject to subsequent quarters of uncertainty,” prompting the reserve adjustment, which he believes will put an end to the need for future adjustments and remove future uncertainty.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 13, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.