WALNUT CREEK, Calif.,
Feb. 15, 2011 /PRNewswire/ -- The PMI
Group, Inc. (NYSE: PMI) today reported a net loss for the fourth
quarter of 2010 of $184.4 million, or
$1.14 per basic and diluted(1) share,
down from a loss of $228.2 million,
or $2.76 per basic and diluted share,
for the same period one year ago. For the full year of 2010,
the Company reported a loss from continuing operations of
$773.0 million, or $5.70 per basic and diluted share, compared to a
loss from continuing operations of $654.0
million, or $7.94 per basic
and diluted share for 2009. For the full year of 2010, the loss
from continuing operations before income taxes was $799.4 million compared to a loss of $1,061.3 million for the full year of 2009.
The PMI
Group, Inc. Fourth Quarter Results
|
|
|
|
Three Months
Ended December 31,
|
|
|
(Dollars in thousands, except
per share data)
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
Loss from continuing operations
before income taxes
|
$(181,753)
|
|
$(368,076)
|
|
|
Income tax expense (benefit)
from continuing operations
|
2,625
|
|
(139,893)
|
|
|
Loss from continuing
operations
|
$(184,378)
|
|
$(228,183)
|
|
|
Loss from discontinued
operations, net of income taxes*
|
-
|
|
-
|
|
|
Net loss
|
$(184,378)
|
|
$(228,183)
|
|
|
|
|
|
|
|
|
Diluted loss from continuing
operations per share
|
$(1.14)
|
|
$(2.76)
|
|
|
Diluted loss from discontinued
operations per share*
|
-
|
|
-
|
|
|
Diluted net loss per
share
|
$(1.14)
|
|
$(2.76)
|
|
|
* Includes the
2009 effects of former subsidiaries PMI Australia and PMI
Asia.
|
|
|
|
|
|
|
The PMI
Group, Inc. Full Year Results
|
|
|
|
Twelve
Months Ended December 31,
|
|
|
(Dollars in thousands, except
per share data)
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
Loss from continuing operations
before income taxes
|
$(799,357)
|
|
$(1,061,283)
|
|
|
Income tax benefit from
continuing operations
|
(26,329)
|
|
(407,292)
|
|
|
Loss from continuing
operations
|
$(773,028)
|
|
$(653,991)
|
|
|
Loss from discontinued
operations, net of income taxes*
|
-
|
|
(5,335)
|
|
|
Net loss
|
$(773,028)
|
|
$(659,326)
|
|
|
|
|
|
|
|
|
Diluted loss from continuing
operations per share
|
$(5.70)
|
|
$(7.94)
|
|
|
Diluted loss from discontinued
operations per share*
|
-
|
|
(0.07)
|
|
|
Diluted net loss per
share
|
$(5.70)
|
|
$(8.01)
|
|
|
* Includes the 2009 effects of
former subsidiaries PMI Australia and PMI Asia.
|
|
|
|
|
|
|
U.S. Mortgage Insurance Operations
U.S. Mortgage Insurance Operations had a net loss of
$169.0 million in the fourth quarter
of 2010 compared to a net loss of $242.0
million in the fourth quarter of 2009. The loss in the
fourth quarter of 2010 was due primarily to continued high losses
and loss adjustment expenses ("LAE").
Total revenues were $149.7 million
in the fourth quarter of 2010 compared to $201.5 million in the fourth quarter of 2009.
The decrease in the fourth quarter of 2010 was primarily due
to lower premiums earned (primarily caused by a decline in primary
insurance in force) and, to a lesser extent, lower investment
income.
New insurance written in the fourth quarter of 2010 was
$2.2 billion, compared to
$2.0 billion in the third quarter of
2010 and $1.0 billion in the fourth
quarter of 2009. At December 31,
2010, primary insurance in force was $101.7 billion compared to $104.6 billion at September 30, 2010 and $113.7 billion at December
31, 2009.
U.S. Mortgage Insurance Operations' losses and LAE declined to
$281.8 million in the fourth quarter
of 2010 compared to $317.1 million in
the third quarter of 2010 and $549.4
million in the fourth quarter of 2009. During the
fourth quarter of 2010, the Company paid total claims including LAE
of $266.6 million compared to
$322.7 million in the third quarter
of 2010 and $518.1 million in the
fourth quarter of 2009. As of December 31,
2010, reserves for losses and LAE, gross of reinsurance
recoverables, were $2.9 billion
compared to $3.0 billion at
September 30, 2010 and $3.2 billion at December
31, 2009.
The number of primary loans in default decreased to 127,478 at
December 31, 2010 from 131,891 at
September 30, 2010 and 150,925 at
December 31, 2009. New notices
of default received in the fourth quarter of 2010 totaled 28,664
compared to 29,715 in the third quarter of 2010 and 37,835 in the
fourth quarter of 2009.
The total number of pool loans in default decreased to 15,589 at
December 31, 2010 compared to 15,970
at September 30, 2010 and 51,104 at
December 31, 2009. The
significant decline in pool loans in default as compared to one
year ago was due primarily to the restructuring of modified pool
policies.
Rescission and claim denial of delinquent risk in force totaled
$271.8 million in the fourth quarter
of 2010 compared to $208.8 million in
the third quarter of 2010 and $217.0
million in the fourth quarter of 2009.
The Company's Homeownership Preservation Initiatives (HPI)
enabled 7,710 borrowers, representing $345
million of risk in force, to retain their homes through loan
modifications and payment plans in the fourth quarter of 2010. For
all of 2010, HPI enabled 41,258 borrowers, representing
approximately $1.9 billion of risk in
force, to retain their homes.
International Operations
International Operations, which include PMI Europe and PMI
Canada, had net income for the fourth quarter of 2010 of
$8.6 million compared to net income
of $2.6 million in the third quarter
of 2010 and a net loss of $2.9
million in the fourth quarter of 2009. Net income for
the fourth quarter of 2010 was due primarily to lower losses and
LAE expenses and lower tax expenses. As a result of contract
commutations and maturities, PMI Europe's risk in force declined to
$674 million at December 31, 2010 compared to $2.0 billion at September
30, 2010 and $4.9 billion at
December 31, 2009.
Corporate and Other
The Corporate and Other segment had a net loss of $23.9 million in the fourth quarter of 2010
compared to net income of $16.7
million in the same period one year ago. The results
for the fourth quarter of 2010 included a loss (representing an
increase in fair market value) of $19.9
million (pre-tax) related to the fair value measurement of
certain corporate debt obligations compared to a gain (representing
a decrease in fair market value) of $34.0
million (pre-tax) in the fourth quarter of 2009.
Capital, Liquidity and Tax Information as of December 31, 2010
- On a consolidated basis, the Company had available funds,
consisting of cash and cash equivalents and investments of
$3.1 billion and total shareholders'
equity of $415.3 million.
- MIC had available funds, consisting of cash and cash
equivalents and investments, of $2.5
billion and total assets in captive trust accounts of
approximately $724 million.
- At the holding company level, The PMI Group, Inc. had available
cash and cash equivalents and investments of $79.1 million.
- The Company had a nominal tax expense in the fourth quarter of
2010 due to the change in the net deferred tax asset resulting from
the repositioning of the investment portfolio and an alternative
minimum tax adjustment. At December
31, 2010, the valuation allowance for the Company's deferred
tax asset was $527.3 million compared
to $453.1 million at September 30, 2010.
About The PMI Group, Inc.
The PMI Group, Inc. (NYSE: PMI), headquartered in Walnut Creek, CA, provides innovative credit,
capital, and risk transfer solutions that expand homeownership and
fund essential services for our customers and the communities they
serve. Through its wholly owned subsidiaries, PMI offers
residential mortgage insurance and credit enhancement products.
For more information: www.pmi-us.com.
Cautionary Statement: Statements in this press release and
supplement that are not historical facts, or that relate to future
plans, events or performance, are "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Readers are cautioned that forward-looking
statements by their nature involve risk and uncertainty because
they relate to events and depend on circumstances that will occur
in the future. Many factors could cause actual results and
developments to differ materially from those expressed or implied
by forward-looking statements. Such factors include, among
others:
- Potential significant future losses as a result of a variety of
factors that are outside our control and difficult to predict.
Among other factors affecting future losses and that could
cause losses to increase more rapidly or to higher levels than
expected are the following:
- Future national and regional economic conditions, including
continued slow economic recovery from the most recent recession or
the potential of the U.S. economy to reenter a recessionary period,
unemployment rates, interest rates, borrower access to credit and
home prices.
- Negative economic changes in geographic regions where our
insurance in force is more concentrated;
- The level of new delinquencies, the cure and claim rates of
delinquencies (including the level of future modifications of
delinquent loans) and the claim severity within MIC's mortgage
insurance portfolio.
- The levels of future loan modifications, rescissions and claim
denials and future reversals of rescissions and claim denials.
- The timing of future claims paid.
- Future levels of new insurance written (and the profitability
of such business), which will impact future premiums written and
earned and future losses.
- In the absence of additional capital or capital relief, higher
than expected losses or an acceleration of expected losses would
likely cause PMI to be out of compliance with applicable regulatory
requirements in 2011.
- In sixteen states, so long as a mortgage insurer does not meet
a required minimum policyholders' position or exceeds a maximum
permitted risk-to-capital ratio (generally 25 to 1), it may be
prohibited from writing new business. Several of these states
require a mortgage insurer to immediately cease writing new
business if it exceeds the applicable state capital requirement.
In other states, including Arizona, MIC's state of domicile, the
applicable regulator has discretion as to whether the mortgage
insurer may continue to write new business. On January 13, 2011, we submitted a waiver request
to the Arizona Department of Insurance (the "Department").
There can be no assurance that the Department will approve
MIC's waiver request and exercise its discretion to permit MIC to
continue writing new business in the event MIC fails to maintain
Arizona's minimum policyholders'
position. In the event MIC does not meet Arizona's minimum policyholders' position and
the Department declines to issue it a waiver, MIC shall be required
to cease writing new business in all states.
- Even if Arizona were to permit
MIC to continue writing new business, other states could require
MIC to cease new business writings if it fails to maintain the
other state's applicable capital adequacy requirements.
Thirteen states in addition to Arizona permit the insurance regulator to
exercise its discretion to as to whether the mortgage insurer may
continue to write new business if it fails to meet the state's
capital requirement. MIC has waivers from California and Missouri, and plans to request waivers from
the additional states whose regulators may exercise discretion in
the event MIC's capital position approaches the regulatory
thresholds. There is no assurance that MIC will be able to
obtain additional waivers.
- In the event that we are unable to write new mortgage insurance
in a limited number of states for the reasons discussed above, we
have a plan to enable us to write new mortgage insurance in those
states out of an existing subsidiary, PMI Mortgage Assurance Co.
There can be no assurance that we will be able to effectuate
this plan.
- The risk that our underwriting policies may not anticipate all
risks and/or the magnitude of potential loss;
- The performance of our insured portfolio of higher risk loans,
such as Alternative-A ("Alt-A") and less than-A quality loans, and
adjustable rate and interest-only loans, which have resulted in
increased losses in prior periods and are expected to result in
further losses;
- The aging of our mortgage insurance portfolio and changes in
severity or frequency of losses associated with our mortgage
insurance policies;
- The possibility that we may not estimate accurately the
likelihood, magnitude and timing of losses in connection with
establishing loss reserves;
- The risk that we overestimate the number of loans that
ultimately cure, which management factors in when establishing loss
reserve estimates, and which could result in loss reserves that are
insufficient to cover our losses on existing delinquent loans;
- The heightened litigation risk relating to rescissions and
claim denials and, in the event that we are unsuccessful in
defending our rescissions or claim denials, the need to establish
loss reserves for, and reassume risk on, delinquent rescinded
loans;
- Our expectation that, because our loss reserves are not
intended to be an estimate of total future losses, our ultimate
actual losses will be higher than, and will substantially exceed,
our loss reserve estimates;
- Further reduction in, or prolonged period of depressed levels
of, home mortgage originations due to reduced liquidity in the
lending market, tighter underwriting standards and the decrease in
housing demand in the U.S.;
- The concentration of our business among a relatively small
number of large customers;
- Heightened competition from the Federal Housing Administration
and the Veterans' Administration or other private mortgage
insurers;
- Potential changes in the charters or business practices of the
GSEs, the largest purchasers of mortgages, including potential GSE
reforms Congress may adopt in 2011 and GSE pricing changes
(including the amount of loan level delivery fees assessed by the
GSEs on loans they purchase), which could reduce the demand for our
products;
- The uncertainty surrounding Fannie Mae and/or Freddie Mac's
(collectively, the "GSEs") adoption of revised mortgage
insurer eligibility requirements and the risk that the GSEs
determine that we are no longer an eligible provider of mortgage
insurance;
- Changes to the current housing finance system as a result of
regulatory or legislative action, including the possibility that
private mortgage insurance is no longer required for GSE-eligible
loans or that the demand for our products and services is severely
reduced;
- Effect of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the "Dodd-Frank Act") on the financial services
industry in general, and on our mortgage insurance business in
particular, including whether and to what extent loans with
mortgage insurance are considered "qualified residential mortgages"
for purposes of the Dodd-Frank Act risk-retention, securitization
provisions;
- Other heightened regulatory and litigation risks faced by the
financial services industry, the mortgage insurance industry and
the Company and MIC;
- Further downgrades or other ratings actions with respect to our
credit ratings or insurer financial strength ratings assigned by
the major rating agencies;
- The potential future impairment of the value of equity or other
securities held in our investment portfolios as a result of
continued volatility in the capital markets;
- Volatility in our earnings caused by changes in the fair value
of our derivative contracts and our need to reevaluate the premium
deficiencies in our mortgage insurance business on a quarterly
basis;
- The risk that we may not be able to realize all of our deferred
tax assets and may be required to record a full valuation allowance
or increase the current partial valuation allowance against our
remaining net deferred tax assets;
- Our ability to return to a period of sustained profitability,
which would allow us to reverse all or a portion of the valuation
allowance that was established against our net deferred tax
asset;
- The risk that the value of the contingent note we received in
connection with the sale of PMI Australia is reduced and,
therefore, reduces or eliminates the commitments of the lenders
under our credit facility and requires us to repay amounts borrowed
under the credit facility; and
- Potential additional losses in our European operations and the
potential that we must make additional capital contributions to
those operations, and/or CMG Mortgage Insurance Company, pursuant
to capital support agreements.
Other risks and uncertainties are discussed in our SEC filings,
including in Item 1A of our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2010,
June 30, 2010 and September 30, 2010, and our Annual Report on Form
10-K for the year ended December 31, 2009. We undertake
no obligation to update forward-looking statements.
(1) Due to the net loss in the quarter, dilutive components of
shares outstanding such as stock options were not included in fully
diluted shares outstanding as their inclusion would have been
anti-dilutive.
THE PMI
GROUP, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
Three Months
Ended December 31,
|
|
Year Ended
December 31,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
|
(Dollars and
shares in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums
written
|
$
140,736
|
|
$
156,126
|
|
$
584,458
|
|
$
678,058
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Premiums earned
|
$
139,560
|
|
$
170,575
|
|
$
590,607
|
|
$
716,841
|
|
|
Net gain from credit default
swaps
|
3,859
|
|
7,574
|
|
8,288
|
|
31,581
|
|
|
Net investment income
|
13,966
|
|
29,465
|
|
78,152
|
|
119,166
|
|
|
Equity in losses from
unconsolidated subsidiaries
|
(861)
|
|
(3,804)
|
|
(12,247)
|
|
(12,019)
|
|
|
Net realized investment
gains
|
5,535
|
|
8,209
|
|
96,516
|
|
37,471
|
|
|
Change in fair value of certain
debt instruments
|
(19,908)
|
|
34,000
|
|
(113,533)
|
|
16,522
|
|
|
Other income
|
2,133
|
|
-
|
|
6,570
|
|
2,328
|
|
|
Total revenues
|
144,284
|
|
246,019
|
|
654,353
|
|
911,890
|
|
|
|
|
|
|
|
|
|
|
|
Losses and
expenses
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment
expenses
|
280,849
|
|
556,189
|
|
1,266,947
|
|
1,756,755
|
|
|
Amortization of deferred policy
acquisition costs
|
5,763
|
|
6,532
|
|
18,439
|
|
17,781
|
|
|
Other underwriting and operating
expenses
|
25,956
|
|
41,282
|
|
119,692
|
|
155,624
|
|
|
Interest expense
|
13,469
|
|
10,092
|
|
48,632
|
|
43,013
|
|
|
Total losses and
expenses
|
326,037
|
|
614,095
|
|
1,453,710
|
|
1,973,173
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
before income taxes
|
(181,753)
|
|
(368,076)
|
|
(799,357)
|
|
(1,061,283)
|
|
Income tax expense (benefit) from continuing operations
|
2,625
|
|
(139,893)
|
|
(26,329)
|
|
(407,292)
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations
|
(184,378)
|
|
(228,183)
|
|
(773,028)
|
|
(653,991)
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations, net of taxes
|
-
|
|
-
|
|
-
|
|
(5,335)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(184,378)
|
|
$
(228,183)
|
|
$
(773,028)
|
|
$
(659,326)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss from continuing
operations per share
|
$
(1.14)
|
|
$
(2.76)
|
|
$
(5.70)
|
|
$
(7.94)
|
|
Diluted loss from discontinued operations per share
|
-
|
|
-
|
|
-
|
|
(0.07)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net loss per
share
|
$
(1.14)
|
|
$
(2.76)
|
|
$
(5.70)
|
|
$
(8.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE PMI
GROUP, INC. AND SUBSIDIARIES
|
|
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
December
31,
|
|
|
|
December
31,
|
|
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
|
|
|
|
|
(Dollars and
shares in thousands, except per share data)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
$
2,820,158
|
|
|
|
$
2,572,533
|
|
|
|
|
Cash and cash
equivalents
|
|
267,705
|
|
|
|
686,891
|
|
|
|
|
Investments in unconsolidated
subsidiaries
|
|
121,040
|
|
|
|
139,775
|
|
|
|
|
Reinsurance
recoverables
|
|
459,671
|
|
|
|
703,550
|
|
|
|
|
Deferred policy acquisition
costs
|
|
46,372
|
|
|
|
41,289
|
|
|
|
|
Property, equipment and
software,
net of accumulated
depreciation and amortization
|
|
85,186
|
|
|
|
101,893
|
|
|
|
|
Deferred tax assets
|
|
142,899
|
|
|
|
178,623
|
|
|
|
|
Other assets
|
|
275,956
|
|
|
|
216,963
|
|
|
|
|
Total
assets
|
|
$
4,218,987
|
|
|
|
$
4,641,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Reserve for losses and loss adjustment expenses
|
|
$
2,958,461
|
|
|
|
$
3,253,820
|
|
|
|
|
Unearned premiums
|
|
64,298
|
|
|
|
72,089
|
|
|
|
|
Debt
|
|
616,158
|
|
|
|
389,991
|
|
|
|
|
Other liabilities
|
|
164,800
|
|
|
|
198,530
|
|
|
|
|
Total
liabilities
|
|
3,803,717
|
|
|
|
3,914,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
415,270
|
|
|
|
727,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
|
$
4,218,987
|
|
|
|
$
4,641,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares issued and
outstanding
|
|
161,168
|
|
|
|
82,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
|
$
2.58
|
|
|
|
$
8.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Please refer to The PMI Group, Inc. Fourth Quarter 2010
Financial Supplement and Supplemental Portfolio Characteristics
for additional information.
SOURCE The PMI Group, Inc.