This securities class action names PMA Capital and certain former officers and directors as defendants and is filed in the United States District Court for the Eastern District of Pennsylvania. Pollin v. PMA Capital Corporation, Civil Action No. 03-06122-EL.
The Complaint alleges that defendants violated Sections 11 and 12 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. According to the Complaint, PMA’s public statements during the Class Period were materially false and misleading because (a) PMA maintained inadequate loss reserves for its PMA Re subsidiary; (b) reserve requirements for PMA Re announced in connection with the initial public offering of the Notes were materially insufficient; and (c) as a consequence of the understatement of loss reserves, PMA’s earnings and assets were materially overstated at all relevant times.
On November 4, 2003, PMA issued a press release announcing that it would have to increase its loss reserves for PMA Re by $150 million, and would be suspending its common stock dividend. This news caused an immediate drop in the price of PMA’s common stock and the trading values of the 8.50% Notes. On November 6, 2003, PMA issued a press release announcing the resignations of its president and chief executive officer and its chairman of the board.