PMI Pmi Grp. (The) Common Stock

PMI Group Inc. (PMI) reported first-quarter net loss of 79 per share, narrower than the loss of $1.90 per share in first-quarter 2010. Net loss was $126.8 million compared with a loss of $157 million in the prior-year quarter.

The quarter continues to suffer due to mortgage losses.

Results include a pre tax gain of $21.7 million or $0.13 per share representing a decrease in fair market value related to the fair value measurement of certain corporate debt obligations compared with a loss of $40.8 million or $0.49 per share representing a decrease in fair market value in the prior year quarter.

Operational Performance

Net premiums written in the quarter were $125 million, down 18% from $151.5 million in the prior-year quarter.

Premiums earned were $120 million in the quarter under review, down 21% from $153 million in the prior-year quarter.

Net investment income dipped 37% year over year to $16.7 million in the quarter.

Reserves for losses and loss adjustment expenses were $2.9 billion as of March 31 2011, down from $3.2 billion as of March 31, 2010.

Total losses and expenses declined 73% year over year to $286 million in the quarter. Substantially lower losses and loss adjustment expenses and underwriting and operating expenses led to the overall decline.

Segment Update

U.S.Mortgage Insurance Operations: Total revenues decreased 24% year over year to $135.5 million in the first quarter. Lower premiums earned coupled with lower investment income resulted in the overall decline.

Losses and loss adjustment expenses declined 15% year over year to $239 million in the first quarter.

Segment net loss widened to $136.6 million from a net loss of $121.8 million in first-quarter 2010 largely due to continued high losses and loss adjustment expenses and lower premiums earned.

International Operations: Net loss in the quarter was $0.9 million, compared with a net income of $0.02 million in the prior year quarter. The loss resulted from the strengthening of loss reserves in PMI Canada to the tune of $1.1 million.

Corporate and Other: The segment reported a net income of $10.4 million in the quarter, reversing the loss of $35.2 million in the prior year quarter.

Financial Update

Cash and cash equivalents at the end of the quarter were $211.5 million, much lower than $859.1 billion at the end of prior year quarter.

Debt increased to $589.8 million from $424.6 million at first quarter 2010 end.

Book value per share was $1.78 as of March 31, 2011, plummeting 74% from $6.96 as of March 31, 2010.

Peer Comparison

MGIC Investment Corp. (MTG), which competes with PMI Group, reported a first-quarter 2011 operating loss of 20 cents per share; wider than the Zacks Consensus Estimate of a loss of 10 cents. However, the loss narrowed from the year-ago quarter's loss of $1.42 per share.       

We keep an Underperform recommendation on PMI Group over the long term. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the shares over the near term.

 
MGIC INVSTMT CP (MTG): Free Stock Analysis Report
 
PMI GROUP (PMI): Free Stock Analysis Report
 
Zacks Investment Research