Noting its historic access to capital, A.M. Best has put the ratings of Blue Bell, Pa.-based PMA Capital Corp. and its subsidiaries “under review,” noting its concern with the parent company’s ability to improve overall capitalization of it subsidiaries given what it sees as “limited financial flexibility.”

The ratings service placed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of PMA Capital’s subsidiaries PMA Insurance Group and its pooled members, Pennsylvania Manufacturers’ Association Insurance Company, Pennsylvania Manufacturers Indemnity Company and Manufacturers Alliance Insurance Company, under review with negative implications. PMA Capital’s issuer credit rating of “bb” is also under review with negative implications.

In addition, the financial strength rating of C++ (Marginal) and issuer credit rating of “b” for PMA Capital Insurance Co. of Philadelphia, Pa., the run-off operations of PMA Capital, remain “under review with negative implications.”

These rating actions reflect the shortfall in overall capitalization at PMACIC, concern over the sale of the run-off operations and potential ongoing exposure to PMA Capital upon the sale closing, according to A.M. Best.

Additionally, the ratings service noted, while operating results have improved in each of the past five years and the capital at PMA is currently adequate for its rating level, risk-adjusted capital ratios have decreased in the past two years. This decrease is due to business growth in 2007 and an investment portfolio of unrealized losses at year-end 2008.

Furthermore, any negative deviations from projected underwriting or investment performance, including any further decline in valuations from its investment portfolio, could result in additional rating pressure, the ratings service said. All ratings will remain under review pending A.M. Best’s review of management’s plan to improve PMA’s overall capitalization and liquidity, the successful execution of the capital funding and resolution of the sale of PMACIC.

A.M. Best did note PMA Capital’s historic access to capital, but also deemed the company to have “limited financial flexibility” at the current time. It also noted tht the ongoing cost of interest payments on existing debt, combined with other holding company obligations and the potential future funding requirements more that offset PMA Capital’s current sources of income.