May 12, 2008

PMI Group swings to hefty 1Q loss on defaults

The Associated Press

Mortgage insurer PMI Group Inc. said Monday it swung to a first-quarter loss from year-ago profit, due to hefty payouts on default claims and charges to write off its investment in bond insurer FGIC.

Delinquencies and defaults among mortgages have increased rapidly over the past year. For each default and foreclosure, PMI is forced to pay out claims to investors that hold the mortgages.

Losses for the quarter ended March 31 totaled $274 million, or $3.37 per share, compared with year-ago net income of $102 million, or $1.16 per share. The latest period includes mortgage insurance losses of $172.5 million due to more claims, added loss reserves and a charge on PMI's investment in embattled bond insurer FGIC.

Revenue climbed to $315.9 million from $294.5 million, as total net premiums written climbed to $255.3 million from $244.1 million on higher premium rates and strong international performance linked to the weaker dollar.

Analysts surveyed by Thomson Financial expected a loss of $1.96 per share on revenue of $288.8 million.

PMI said it reduced the value of its investment in Financial Guaranty (FGIC) from $103.6 million at Dec. 31 to zero. The company said it is under no obligation to provide additional capital to FGIC.

PMI said it continues to evaluate various capital raising initiatives, including reinsurance, the possible complete or partial sale of assets and capital markets transactions.

The company affirmed its outlook for 2008 paid mortgage insurance claims of $825 million to $975 million.

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AP Business Writer Jennifer Malloy