Moody's lowered the Philadelphia-based insurance holding company's long-term debt ratings from "Baa3" to "Ba1."

The insurance financial strength of PMA Capital Insurance Company went from "A3" to "Baa1." Moody's affirmed its "Baa1" insurance financial strength rating of PMA Insurance Group. However, Moody's gave all three a negative outlook.

Moody's said it was not only concerned with the company's poor performance in 2002, but that $65 million in debt to one bank facility could place strains on the company's liquidity.

PMA said it has paid $20 million of the $65 million it owes for total company debt of $131.25 million.

In a statement, John W. Smithson, president and chief executive officer for PMA, said, "We continue to believe that we will ultimately be successful in executing on various aspects of our capital plan, which we believe will provide us with the capital necessary to refinance our $45 million of outstanding bank debt and accomplish our business plan."

He continued, "We do not believe that Moody's concern regarding the recent performance of our share price will prevent us from accomplishing our objectives."

He said the company does not plan to issue more common stock or debt convertible into common stock.

As of 12:30 p.m., PMA's stock dropped 50 cents to $7.90 a share on the NASDAQ.